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HomeMy WebLinkAboutRes2014-044 Sponsored by: Hunt CITY OF SEWARD, ALASKA RESOLUTION 2014-044 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA,AUTHORIZING THE ASSIGNMENT OF THE GROUND LEASE WITH SEWARD SHIP'S DRYDOCK, INC. FOR THE REAL PROPERTY DESCRIBED AS LOTS 1-A AND 3,BLOCK 7,FOURTH OF JULY CREEK SUBDIVISION SEWARD MARINE INDUSTRIAL CENTER, SEWARD SHIP'S DRYDOCK REPLAT, ACCORDING TO PLAT 2002-22, SEWARD RECORDING DISTRICT, THIRD JUDICIAL DISTRICT, STATE OF ALASKA,TO VIGOR ALASKA-SEWARD,LLC,SUBJECT TO ASSIGNOR PROVIDING THE CITY PROOF OF ENVIRONMENTAL LIABILITY INSURANCE FOR FOUR(4)YEARS FROM THE DATE OF ASSIGNMENT, AND AUTHORIZING THE CITY MANAGER TO ENTER INTO AMENDMENT NO. 5 TO THE ASSIGNED GROUND LEASE WHEREAS, the city (Lessor) and Seward Ship's Drydock, Inc. (Lessee) entered into the current ground lease in 1995; and WHEREAS,the Ground Lease has been amended and extended,with the most recent in July 2012 extending the term until June 30, 2040; and boo WHEREAS, the lease authorizes assignment by the Lessee subject to city approval if the Lessee sells its vessel repair and construction business; and WHEREAS, Seward Ship's Drydock,Inc. desires to sell and Vigor Alaska- Seward, LLC desires to purchase the vessel repair and construction business operated on the leased land; and WHEREAS, Seward Ship's Drydock, Inc desires to assign its lease to Vigor Alaska - Seward, LLC, and Vigor Alaska desires to assume the lease; and WHEREAS, Vigor Alaska - Seward, LLC desires to amend the lease as presented at this meeting and attached hereto; and WHEREAS,the city requires the Assignor to provide the City with proof of environmental liability insurance naming the city as insured as a condition of assignment; and WHEREAS, city administration has negotiated the terms of the lease amendment, and the parties agree that a timely and efficient transfer is in the parties' and the public's interest; and WHEREAS,the City Charter,provisions of which cannot be waived by the council,requires that resolutions involving real property transfers become effective not less than thirty (30) days „�. following passage and approval. CITY OF SEWARD, ALASKA RESOLUTION 2014-044 soil NOW,THEREFORE,BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA that: Section 1. The Seward City Council authorizes the assignment of the Ground Lease from Seward Ship's Drydock,Inc.to Vigor Alaska-Seward,LLC,subject to Seward Ship's Drydock,Inc. satisfactory proof of insurance for environmental liability naming the city as insured for a period of four (4) years. Section 2. The Ground Lease assigned to Vigor Alaska-Seward,LLC is hereby amended as presented at this meeting and attached hereto,and the City Manager is authorized to execute same in substantially the form presented here. Section 3. This resolution shall take effect thirty (30) days after passage and posting. PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this 12th day of May, 2014 9 i THE CITY OF SEWARD, ALASKA •..+i t can Bardarson, Mayor AYES: Keil, Casagranda, Terry, Squires, Butts, Bardarson NOES: None ABSENT: Darling ABSTAIN: None ATTEST: id/Le____e, ti Johanna Kinney, C f C j City Clerk (City Seal) °°;`y OF SE{I,'�., , c, r . Os r ® i SEAL I * :' i .: -..2..-, ? I i 7. i ♦ ,� s' 4 TFOF A4-�' City Council Agenda Statement Meeting Date: May 12, 2014 �1ocSFw To: Seward City Council .44-A-SK" From: Jim Hunt, City Manager Agenda Item: Assignment of the ground lease with Seward Ship's Drydock to Vigor Alaska LLC, and amendment of the assigned lease. BACKGROUND & JUSTIFICATION: The City of Seward has leased land to Seward Ships' Drydock, Inc. since 1988. The current ground lease was entered into in 1995 for a Lease Term through June 30, 2009, and amended in January 2010 and further amended in July 2012 to extend the term until June 30, 2040. Jim Pruitt, President of Seward Ship's Drydock, Inc. has sold his vessel repair and construction business to Vigor Alaska, LLC, and now desires to assign Seward Ship's Drydock's entire interest under the lease to Vigor Alaska, LLC, as authorized under Article 8, Section 8.03 of the current lease, subject to the approval of the City. Vigor Alaska, LLC, having conducted all appropriate inquiry regarding the site, agrees to accept, assume, and agrees to keep, perform and fulfill all of the terms, covenants, conditions and obligations of the lease, as amended by this resolution. Vigor desires to amend sections of the lease as attached hereto and as presented at this meeting. Corresponding amendments are also required to align provisions of the Operations and Maintenance Agreement. One amendment seeks to have the City indemnify Vigor for a period of four years for potential cleanup liability should a contaminant be found during that period and be determined to have existed prior to this lease assignment. The administration recommends that as a condition of lease assignment Seward Ship's Drydock, Inc. provide the City with proof of environmental liability insurance for that same period of time. Attached are the lease amendments, Phase I and Phase II Environmental Site Assessments, the original lease dated April 25, 1995, lease amendment 1 dated December 23, 1997, lease amendment 2 dated January 2000, lease amendment 3 dated October 26, 2001, lease amendment 4 dated January 14 2010, and Agreement to Extend Ground Lease dated July 11, 2012. INTENT This resolution will authorize assignment of the lease from Seward Ship's Drydock, Inc. to Vigor Alaska, LLC, and amend sections of the newly assigned lease. CONSISTENCY CHECKLIST: Yes No N/A Comprehensive Plan (3.1.1.2, page8): "Expand the Seward Marine 1. Industrial Center; Improve and Expand onshore and offshore maritime X facilities." 2 Strategic Plan (Page 7): "Expand development in the Seward Marine X Industrial Center." 3. Other(list): X Assignment,Assumption and Amendment of Lease i` This ASSIGNMENT, ASSUMPTION AND AMENDMENT OF LEASE (this "Agreement") is made this [ ] day of May, 2014, by and among Seward Ship's Drydock, Inc., an Alaska corporation ("Assignor''), Vigor Alaska - Seward LLC, an Alaska limited liability company ("Assignee"), and the City of Seward, Alaska, an Alaska municipal corporation ("Lessor"). RECITALS A. By that certain Ground Lease dated April 25, 1995, as amended by that certain Lease 95-094 Amendment No. 1, dated as of December 23, 1997, as further amended by that certain Lease Amendment Number 2, dated as of January 2000, as further amended by that certain Ground Lease Amendment No. 3, dated as of October 26, 2001, as further amended by that certain Ground Lease Amendment No. 4, dated as of January 14, 2010, as further amended by that certain Agreement to Extend Ground Lease, dated as of January 26, 2010, as further amended by that certain Agreement to Extend Ground Lease, dated as of July 11, 2012, copies of which are attached hereto marked ANNEX A (collectively, the "Lease"), by and between Lessor, as lessor, and Assignor, as lessee, Lessor agreed to lease to Assignor and Assignor agreed to lease from Lessor all that certain tract of land with improvements situated thereon commonly known as Lots 1-A and 3 Block 7, Fourth of July Creek Subdivision Seward Marine Industrial Center(the"Premises"). B. Pursuant to that certain Asset Purchase Agreement (the "APA") dated as of May 2, 2014 by and between Assignor, as a Seller Party, and Assignee, as Buyer, Assignor agreed to sell and Assignee agreed to purchase from Assignor, substantially all of Assignor's business assets and to assume certain specifically identified liabilities of Assignor. C. As further consideration for the transactions contemplated by the APA, Assignor desires to assign the Lease to Assignee and Assignee desires to accept, as of the date hereof, which is contemporaneous with the closing of the transactions contemplated by the APA, such assignment and assume and discharge the obligations of Assignor arising from the Lease from and after the date hereof pursuant to this Agreement. D. The Lease provides, among other things, the right of Assignor to assign the Lease, subject, nevertheless, to the consent of Lessor. E. Lessor and Assignee desire to amend the Lease, effective upon the assignment from Assignor to Assignee, as provided in this Agreement. AGREEMENT NOW, THEREFORE, for and in consideration of the covenants herein contained and intending to be legally bound hereby the parties do hereby agree as follows: 1. Recitals; Definitions. The recitals set forth above are incorporated herein by reference. Capitalized terms not otherwise defined herein shall have the same meaning as in the Lease, the provisions of which are incorporated herein as fully set forth herein. 2. Assignment of Lease. Subject to the terms and conditions of this Agreement, Assignor does hereby assign to Assignee all of Assignor's right, title and interest in and to the Lease (as the same is amended by this Agreement) (the "Assignment'). Assignee does hereby agree to and accept the Assignment and assume and agree to keep, perform and fulfill all of the terms, covenants, conditions and obligations otherwise required to be kept by Assignor under the Lease (as amended by this Agreement)on and after the date hereof. 3. Direct Lease. The Lease shall continue in full force and effect as a direct Lease between Lessor and Assignee, as Lessee thereunder, upon and subject to all of the terms, covenants and conditions of the Lease (as amended by this Agreement). FISCAL NOTE: The lease rates are unchanged and the City will not assume the cost of the environmental liability insurance, as that is paid for by Seward Ships Drydock, Inc. There are no additional foreseeable costs associated with the transfer of this lease. via.4444‘.6./. Approved by Finance Department: 1)(4442 ATTORNEY REVIEW: Yes: X No: RECOMMENDATION: 0+4 Approve Council Resolution 2014- authorizing assignment of the lease from Seward Ship's Drydock, Inc. to Vigor Alaska, LLC, and amending sections of the said lease. 4. Amendment to Lease. Lessor and Assignee hereby amend the Lease, effective as of the date hereof, ho provide oofollows: 4.1 Environmental Matters. Sections 4.06(c) and 4.06(f) are hereby deleted in their entirety and shall be substituted with the following: ^(d Reserved." ^UD Indemnification. (i) Definitions. For purposes of this Sechon, the following terms or phrases shall have the following meanings: "Baseline Audit shall mean a Phase II inveatigsdion, which conforms with the ASTM Standard E-1903'11: Standard for Environmental Site Assessments: Phase || Environmental Site Assessment Pnooeem, the results of which are attached hereto as Exhibit C. and any follow-on investigation deemed necessary or desirable, ino|uding, without limitation, the results of the current or upcoming EPA investigation. Lessee shall provide written notice and a copy to City of the Baseline Audit and information. The Baseline Audit establishes the baseline conditions of the Premises for purposes of determining environmental liabilities addressed in this Section. "Cleanup" shall mean any p|onning, invesdQadmn, remadiadon, removo|, response acdono, or disposal, as those terms are defined in the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. § 9601. et. seq. ("CERCLA"), AS Title 46. and analogous state etotutee, associated with including |ond, groundwater soil vapor, marine sediments or any other environmental medium or place where Hazardous Substances may come to be located. "Pre-existing Contamination"shall mean the following: Any Hazardous Substances on or in the Premises (including land, groundwater soil vapor, marine sediments or any other environmental medium or place where Hazardous Substances may come to be located) which is disclosed in, arising out ofor related to contamination revealed in the Baseline Auditor . Any Hazardous Substances arising from or related to operations at the Premises prior to the effective date of that certain Aonignment. Assumption and Amendment of Leaoe, dated as of May []. 2014. by and among Seward Ship's Drydock, Inc., an Alaska corporation, Vigor Alaska - Seward LLC, an Alaska limited liability uompany, and the City of Seward, Alaska, an Alaska municipal corporation (the"Assignment'). "RequirodbKLaw' shall mean any actions or obligations associated with the Premises or prior operations at the Premises which are (i) required by any regulatory agency under any and all applicable federal, state or local stmtukoo, regulations or ondinanmaa, now or hereinafter in effnct, relating to pollution or environmental protection; or (ii) required by any final and non-appealable court order in an action brought by a third party for enforcement of such laws; or (iii) required pursuant to a Cleanup plan agreed to by City or Lessee to carry out Cleanup obligations imposed under such laws. "Subsequent Contamination" shall mean any Hazardous Substances on or in the Premises that are not Pre-existing Contyminahon, unless otherwise demonstrated by Lessee. Lessee may demonstrate that Hazardous Substances on or in the Premises not disclosed in the Baseline Audit are not Subsequent Contamination by submitting to City credible and mutually acceptable evidence through laboratory data, operational naoorde, historical documents such as aerial photographs or other material proof, that 2 �� such contamination existed prior to the date of the Baseline Audit. Within thirty (30) | days of the d��mrycf such ev�enoatoCby. CdyohoUda|�ervvh�ennot�e (o^Q���utm ~ Notice") to Lessee indicating its disagreement with such findings. The failure to timely deliver a Dispute Notice shall constitute an acceptance by City of Lessee's findings. Following the delivery of a Dispute Nohoe, the following process shall be utilized to resolve such dispute: (a) Within thirty (30)days of the delivery of the Dispute Notice, City and Lessee shall select a mutually agreeable third-party environmental consulting or engineering firm (the "Referee") to evaluate the Hazardous Substances so in dispute (it being understood that in making such evaluation, the Referee shall be functioning as an expert and not as an arbitrator). The Referee shall determine whether the Hazardous Substances so discovered constitute Pre-existing Contamination or Subsequent Contamination, If City or Lessee disagrees with the determination of the Refenao, than it shall so notify the other party in writing within five (5) days of the receipt of the Referee's final report. The failure to timely deliver such notice shall constitute an acceptance by such party of the Referee's findings. In the event either party timely submits such nodce, the provisions of Article 12 hereof shall apply to the resolution of such dispute. (ii) Responsibility and Indemnity for Environmental Liability. (A) General Allocation of Responsibilities. Except as otherwise specifically set forth in this 8eotion. City shall be responsible for liability for any Cleanup Required by Law of Pre-existing Contamination and Lessee shall be responsible for liability for Cleanup Required by Law of Subsequent Contamination. (B) Lessee Indemnification of City for Subsequent Contamination. Lessee agrees to indemnify, hold harmless and defend City, and the officors, employees and agents of City, from and against any and all c|oims, demands, damages, losses, liens, |\obU\des, penalties, fines, lawsuits and other proceedings and costs and expenses (including attorneys'fees), arising directly or indirectly from or out of or in any way connected with Subsequent Contamination that involves: a. The failure of Lessee to comply with its covenants and agreements contained in Section 4 that result in liability relating to Subsequent Contamination; b. Any activities on the Premises which directly or indirectly result in the Premises becoming contaminated with Hazardous Substances that are Subsequent Contamination; c. The discovery of Hazardous Substances on the Premises determined not to be Pre-existing Contamination in accordance with the provisions of this Section 4.06(f). d. The clean-up of Subsequent Contamination from the Premises. (C) City Indemnification of Lessee for Pre-existing Contamination. City agrees to indemnify, hold harmless and defend Lesowe, and the officers, employees and agents of Lessee, from and against any and all cioima, demands, damages, losses, liens, |iabUidea, penalties, fines, lawsuits and other proceedings and costs and expenses (including Mink attorneys fees), arising directly or indirectly from or out of or ri any way connected with Pre-existing Contamination; provided, hmwevar. that wm� such obligation to indemnify with respect to Pre-existing Contamination not disclosed in, arising out of or related to contamination revealed in the Baseline Audit shall only be effective at such time as all funds held pursuant to that certain Escrow Agneement, by and among Lessee, Seward Ship's Drydock, Inc. and James Pruitt, dated as of May [ ], 2014. shall have been fully released by the parties thereto, and that all expenses associated with such indemnification are subject to appropriation by the City Council of City, which shall not unreasonably (in light of the intents and purposes of this Section 4.06UD) be withheld. Further. City agrees to act with all dispatch and use all reasonable means to secure Federal, State or local appropriations to satisfy its obligations under this Section 4.06(f). In no case shall the indemnification obligations of City pursuant to this Section 4.06(f)(ii)(C) apply following the four(4)-year anniversary of the Assignment." 4.2 Option to Terminate Lease. Section 7.05 is hereby deleted in its entirety and shall be substituted with the following: "Section 7.OS ' Reaonved." 4.3 Assignment. Section 8.03 is hereby deleted in its entirety and shall be substituted with the following: "Section 8.03 - Assignment. Notwithstanding Section 8.01. Lessee may assign its entire interest under this Lease to (a) a person to whom Lessee sells its vessel repair and construction buoinaau, provided that the assignee and terms of the assignment shall be subject to approval by City, or (b) any entity that dinoct|y, or indirectly through one or more intermadiahoa, controls or is controlled by, or is under common control with, Lessee,without consent or approval by City." w� 4.4 Events of Default. Section 11.01(a) is hereby deleted in its entirety and shall be substituted with the following: "(a) Failure by Lessee to pay promptly when due the rent required to be paid under this Leeae, and such amount remains unpaid for a period of seven (7) business days following the date such rent payment is due." 4.5 Notices. Lessee's notice address provided for in Section 14.06 is hereby amended as follows: Vigor Alaska-Seward LLC do Vigor Alaska LLC 3801 N. Tongass PO Box S47O Ketchikan,Alaska 99901 Attention:Adam Beck 5. Warranties and Representations. 5.1 Lessor. Lessor hereby represents and warrants that the document attached hereto as ANNEX A is a true and correct copy of the Lease. The Lease is in full force and effect and has not been amended by any agreement, writtmn, verbal or otherwise, between Assignor and Lessor. Other than the provisions of this Agreement, and that certain Maintenance and Operating Agreement between Lessor and Assignor dated as of April 1, 2012. the Lease represents the entire agreement between Lessor and Assignor relating to the Premises. Lessor has the right, power and authority to 4 ��~ � = enter into this Agreement. 5.2 Assignor. Lessor has complied with its obligations under the Lease and has not assigned its interest in the Lease. Assignor represents, warrants and covenants to Assignee that, as of the date of this Agreement: A. Neither Lessor nor Assignor has taken any action to terminate the Lease prior to its expiration pursuant to its terms. B. No rent has been paid in advance other than the current quarter and as otherwise provided by the Leaae, sub)ect, hmwaver, that any rents due and owing by Assignor to Lessor are hereby reserved by Lessor. C. All obligations under the Lease have been complied with by Assignor (or waived in writing by Lesoor), and there has been no violation of or default under any of the terms of the Lease by Assignor as of this date and no facts exist which, with the giving of notice and/or the passage of time, would constitute such a violation or default or any other claim by Lessor or Assignor under the Lease of any nature or kind, except those items listed at "Material Compliance Issues", page ES'2, of the ERM Phase I Environmental Site Assessment attached hereto as ANNEX B. D. Assignor has not assigned the Lease or received notice of an assignment of the Lease by Lessor. Assignor has not sublet all or any portion of the Premises, and Assignor does not hold the Premises under assignment or sublease. E. Assignor has the right, power and authority to enter into this Agreement. F. Commencing on the date of this Agreement and subjec to the terms of the Leaoe, as amended by this Agreement, the Premises at all times hereafter during the term of the Lease may be held by Assignee (or its assignee or sublessee)without any lawful interruption by Lessor or Assignor or any person or persons claiming under or through Lessor or Assignor. L 5.3 Assignee. Assignee represents, warrants and covenants to Lessor that as of the date of this Agreement A. It is duly authorized, and has the right and pmwer. to enter into this Agreement. B. It has taken all necessary corporate action to enter into this Agreement and carryout the provisions hereof. C. It has the financial capacity and expertise to enter into this Agreement and operate a shipyard on the Premises in accordance with this Agreement. O. Entry into this Agreement and carrying out the provisions hereof does not violate or conflict with the terms of any law or order of any administrative agency or the terms of any agreement of the Assignee or order,judicial or otherwise to which Assignee may be subject. S. Post-Assiqnment Insurance By Assignor. Assignor shall obtain from a licensed insurer a policy of premises pollution liability insurance insuring Lessor and Assignor from claims made during the policy term arising from Pre-existing Contamination or Subsequent Contamination which insurance a) shall be subject to commercially reasonable terms and exclusions, b) have limits of liability of $1,000,000.00 per pollution condition and $3,000,000.00 aggregate, c) shall name Lessor and Assignor as insureds, and d) be maintained in effect for a period of four(4)years from the date of this agreement. 7. Miscellaneous: 71_ Successors and Assigns. This Agreement shall inure to the benefit and shall be binding upon the successors and assigns of the parties hereto and 8 � -�A 7.2 Interpretation. \n the event of any conflict between the provisions of the Lease �- and the provisions of this Agreement, the provisions of this Agreement shall control. As amended hereby, all of the terms, covenants and conditions of the Lease shall remain in full force and effect after the date hereof, and are hereby ratified and confirmed in all respects. All paragraph headings of this Agreement are inserted for convenience only and shall not constitute a part of this Agreement, nor shall they in any way affect its moaning, oonatrucdon, interpretation or effect. This Agreement shall be construed and enforced exclusively in accordance with the laws of the State of Alaska. 7.3 Notices. All nodceo, naqueoto, demondo, directions and other communications (collectively, "notices") under the provisions of this Agreement shall be in writing (including facsimile communication) unless otherwise expressly permitted hereunder and shall be sent by first-class or first-class express maU, or by facsimile with confirmation in writing mailed f\rst-o|aao, in all cases with charges prepaid, and any such properly given notice shall be effective when received. All notices shall be sent to the applicable party at their address set forth in Section 14.06 of the Lease (as amended by this Agreement) or, in the case of Assignor, at the address of Lmnoor, or in accordance with the then unrevoked written direction from such party to the other party hereto. 7.4 Relationship. The parties recognize (hat, for purposes of this Agreement, Assignee is a "lessee"of Lessor and "assignee" of Assignor, and nothing in the Lease or this Agreement is intended or shall be construed to create an employer/employee relationship or a joint venture or a partnership relationship, or to allow Lessor or Assignor to exercise control or direction over the matter or method by which Assignee performs under this Agreement. 7.5 Sovonabi|ih/. The invalidity of any portion of this Agreement shall not affect the force and effect of the remaining valid portions of this Agreement. 7.6 Further Assurances. Each of Lessor, Assignor and Assignee ohoU, from time to time upon the request of any of the others, promptly and duly execute, acknowledge and deliver any and all such further instruments and docvmanta, and shall take such further action, as may be wm� necessary or desirable to confirm this Agreement and to carry out the purpose and intent hereof. 7.7 Counterparts/Execution. This Agreement may be executed in countarparto, including by means of PDF signature pagen, each of which shall constitute an original and all of which, when taken together, shall constitute one and the same instrument. The exchange of copies of this Agreement and of signature pages by electronic transmission shall constitute effective execution and delivery of this Agreement as to the parties and such copies may be used in lieu of the original Agreement for all purposes. O Lessor's Consent. Assignor and Assignee acknowledge and agree that Lessor's consent is necessary for this Agreement. Lessor, intending to be legally bound hereby, consents to the Assignment of the Lease by Assignor to Assignee pursuant to the terms of this Agreement. Lessor represents and warrants that it has full power and authority to enter into and grant this Lessor's consent under Resolution 20144 of Lessor authorizing its City Manager to enter into this Agreement on behalf of Lessor and the parties agree that the power and authority of Lessor to enter into and grant this consent is subject to the terms of Resolution 2014-[]. Each of Assignee and Assignor have provided Lessor with certified copies of all necessary corporate resolutions and other documents evidencing the authority of persons signing this Agreement on their behalf and to bind them in accordance with the terms of this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF,the undersigned have hereunto set their hands and seals by their duly authorized officers as of the date and year set forth opposite their names below, intending to be legally bound. ASSIGNOR: SEWARD SHIP'S DRYDOCK, INC. / By: - Name: James Pruitt Title: President i•••• [Assignment,Assumption and Amendment of Lease] ASSIGNEE: VIGOR ALA -7RD L By:e="7--- Name: Adam Beck/ Title: President ori [Assignment,Assumption and Amendment of Lease] LESSOR: rrr. CITY OF SEWARD, ALASKA By: Name: James Hunt Title: City Manager ATTEST: By: Name: Johanna Kinney, CMC Title: City Clerk kir ir... [Assignment,Assumption and Amendment of Lease] ANNEX A LEASE Attached. " CITY OF SEWARD, ALASKA as Lessor to SEWARD SHIP'S DRYDOCK, INC, as Lessee GROUND LEASE Dated as of April 25, 1995 kibi• 020108 TABLE OF CONTENTS ARTICLE 1 Definitions ARTICLE 2 Lease of Premises Section 2.01 - Lease of Premises Section 2.02 - Legal Description Section 2.03 - Lease Term Section 2.04 - Extension of Lease Term Section 2.05 - Covenant of Quiet Enjoyment ARTICLE 3 Rent owlSection 3.01 - Amount of Rent Section 3.02 - Payment of Rent Section 3.03 - Adjustment to Rent After Appraisal Section 3.04 - Periodic Adjustments to Rent Section 3.05 - Rent Credits for Deferred Maintenance ARTICLE 4 Use of Premises Section 4.01 - Use of Premises Section 4.02 - Specific Use Restrictions Section 4.03 - Platting Section 4.04 - Land Use Approvals Section 4.05 - Easements and Rights-of-Way Section 4.06 - Environmental Matters ARTICLE 5 Construction by Lessee _ Section 5.01 - Construction _ Section 5.02 - Protection Against Liens _ Section 5.03 - Fencing on Premises City of Seward Ground Lease AMMOOte2 020109 lbw ARTICLE 6 SMIC and Public Port Facilities 14 Section 6.01 - Adequacy of Port Facilities 14 Section 6.02 - Other Leasing by City 14 Section 6.03 - Operation by Lessee 14 Section 6.04 - Repairs on Ship lift Facility Platform 14 Section 6.05 - Port and Harbor Tariff 14 ARTICLE 7 Termination or Expiration of Lease Term 15 Section 7.01 - Lessee's Duty to Surrender 15 Section 7.02 - Holding Over 15 Section 7.03 - Disposition of Improvements 15 Section 7.04 - Determination of Compensation 16 Section 7.05 - Option to Terminate Lease 16 Section 7.06 - Option to Renew Operating Agreement 16 ARTICLE 8 Sublease or Assignment 16 Section 8.01 - Assignment of Lease or Subleasing 16 Section 8.02 - Subleasing 17 Section 8.03 - Assignment 17 Section 8.04 - Assignment of Lease for Security 17 ARTICLE 9 Indemnity: Insurance 18 Section 9.01 - Lessee's Duty to Indemnify 18 Section 9.02 - Insurance Requirements 18 ARTICLE 10 Condemnation 20 ARTICLE 11 Default: Remedies 20 Section 11.01 - Events of Default 20 Section 11.02 - Remedies for Default by Lessee 21 Section 11.03 - No Waiver of Breach 23 City of Seward Ground Lease Page ii AMM00182 020110 • ARTICLE 12 Dispute Resolution 23 Section 12.01 - Submission of Claims 23 Section 12.02 - Arbitration 23 ARTICLE 13 Maintenance and Repairs of Premises 24 Section 13.01 - Normal Maintenance Section 13.02 - Inspection of Premises 24 Section 13.03 - Taxes, Assessments and Other Charges 24 Section 13.04 - Fire Protection 25 Section 13.05 - Parking 25 ARTICLE 14 Miscellaneous 25 Section 14.01 - Time Section 14.02 - Entire Agreement 25 Section 14.03 - Relationship of Parties 25 Section 14.04 - Covenants 25 Section 14.05 - Esto 25 ppel Certificates 26 Section 14.06 - Notices Section 14.07 - Binding Effect 26 Section 14.08 - Severability 26 Section 14.09 - Amendments 26 Section 14.10 - Execution in Counterparts 26 27 Section 14.11 - Applicable Law; Jurisdiction 27 Section 14.12 - Captions 27 City of Seward Ground Lease AuMOD182 Page iii 020111 GROUND LEASE This Ground Lease is made as of April 25, 1995 between the City of Seward, Alaska, an Alaska municipal corporation ( City"),whose address is P.O. Box 167, Seward, Alaska 99664, and Seward Ship's Drydock, Inc. ("Lessee"), whose address is P.O. Box 944, Seward, Alaska 99664. WHEREAS, City and Lessee are Lessor and Lessee, respectively, under a lease agreement effective as of September 22, 1988, as amended (the "Prior Lease"), a memorandum of which was recorded at Book 53, Page 255, Seward Recording District, Third Judicial District, State of Alaska, under which Lessee leased from City certain real property located in the City of Seward, as described in the Prior Lease (the "Former Premises"); and WHEREAS, an arbitrators' decision and order dated January 4, 1993, set forth certain rights of City and Lessee under the Prior Lease, including the determination that City could not enforce any penalty against Lessee for a period of 24 months after the date of the arbitrators' decision and order (or until January 9, 1995), with respect to Lessee's failure to construct on the Former Premises a permanent covered repair building capable of enclosing a vessel 300 feet in length (the "300-Foot Building"); and Imp WHEREAS,the City Council of City has declined to extend the time for construction of the 300-Foot Building, and has proposed that in lieu of constructing the 300-Foot Building Lessee assume all expenses of maintaining and operating City's Shiplift Facility described herein; and WHEREAS, by entering into this Lease Lessee will be relieved of the obligation to construct the 300-Foot Building, and by a separate maintenance and operating agreement with City dated the date hereof (the "Operating Agreement") Lessee will assume all expenses of operating and maintaining City's Shiplift Facility, and Lessee will continue best efforts for the construction of a covered work station for vessel repair; and WHEREAS, City and Lessee agree to share equally the burden of Shiplift Facility deferred maintenance through direct expenditures by Lessee and by up to five years of rent credits by City; and WHEREAS, Lessee will repair and replace Shiplift Facility deferred maintenance items according to a mutually agreeable schedule and list of tasks; and City of Seward Ground Lease Page 1 AMM001132 020112 j WHEREAS, the parties have determined that it is in their respective interests to modify substantially their relationship under the Prior Lease, by terminating the Prior Lease and entering into this Lease and the Operating Agreement to replace the Prior Lease; and WHEREAS, City has agreed to lease to Lessee the premises described herein, which includes the Former Premises (the "Premises"), and Lessee has agreed to lease the Premises from City under the terms and conditions set forth herein; and WHEREAS, City has invested substantial public monies in the construction of public port facilities adjacent to and on the Premises in order to provide opportunities for the development of a vessel repair and construction industry in the City of Seward; and WHEREAS, the City Council of the City of Seward has determined that a lease of the Premises and construction and operation thereon of a vessel repair and construction facility is in the public interest in that such a facility would be compatible with the public's use of the public port facilities, provide employment for the residents of the City of Seward, and promote the growth and stability of the economy of the City of Seward; and WHEREAS, Lessee has and will continue to offer comprehensive vessel repair and construction services, including without limitation steel and other metal work, marine pipe fitting, marine electrical repair, waste handling, sand blasting, painting and other marine services, and Lessee has and will continue to be capable of handling vessels up to 300 feet in length, and provide employment for residents of the City of Seward; NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties agree as follows: ARTICLE 1 Definitions The following terms will have the meanings indicated below unless the context clearly requires otherwise: "Arbitration" means arbitration under the procedure set forth in Article 12. "City" means the City of Seward, Alaska. "Claim" means a demand or assertion by either party to this Lease, seeking, as a matter of right, adjustment or interpretation of Lease terms, payment of money, extension City of Seward Ground Lease Page 2 AMMO:71132 020113 of time or other relief with respect to the terms of this Lease, and also includes other disputes and matters in question between City and Lessee arising out of or relating to this Lease. "Deferred Maintenance" means all repair and maintenance items for the Ship lift Facility identified as such under the terms of the Operating Agreement. "Environmental Laws" means all local, state and federal laws, ordinances, regulations and orders related to environmental protection; the use, storage, generation, production, treatment, emission, discharge, remediation, removal, disposal or transport of any Hazardous Substance; or any other environmental matter, including without limitation any of the following statutes: (i) Federal Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Sections 6901-6991K; (ii) Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601-9675; (iii) Federal Clean Air Act, 42 U.S.C. Sections 7401-7642; (iv) Federal Hazardous Material Transportation Control Act of 1970, as amended, 49 U.S.C. Sections 1801-1812; (v) Federal Clean Water Act of 1977, as amended, 33 U.S.C. Sections 1251-1387; (vi) Federal Insecticide, Fungicide and Rodenticide Act, as amended, 7 U.S.C. Sections 2601-2671; (vii) Federal Toxic Substances Control Act, 15 U.S.C. Sections 2601-2671; (viii) Federal Safe Drinking Water Act, 42 U.S.C. Sections 300f-300i-26; and (ix) Title 46 of the Alaska Statutes. "Event of Default" means any of the events described in Section 11.01. "Fiscal Year" means the calendar year. "Force Majeure" means, without limitation, the following: acts of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the government of the United States or of the State of Alaska or any of their departments, agencies, subdivisions or officials, or any civil or military authority; City of Seward Ground Lease Page 3 AMM00182 020114 J insurrection; riots; landslides;icebergs;typhoons;tornadoes;adverse weather conditions; tidal waves; earthquakes; fires; storms; droughts; floods; explosions; breakage, malfunction or accident to facilities, machinery, transmission pipes or canals; or any other cause or event not reasonably within the control of the Lessee. "Hazardous Substances" means any substance or material defined or designated as hazardous or toxic waste, hazardous or toxic material, a hazardous, toxic or radioactive substance,or other similar term, by any Environmental Laws, and shall include any such substance or material as may hereafter become defined or designated as hazardous or toxic material by any Environmental Laws. "Lease" means this Lease, as amended from time to time. "Lease Term" means the duration of the Lease of the Premises to Lessee as set forth in Section 2.03. "Lessee" means Seward Ship's Drydock, Inc., an Alaska corporation, its successors and assigns. "Operating Agreement"means the Maintenance and Operating Agreement between City and Lessee dated April 25, 1995. "Port Facilities" means all public port facilities owned or operated by City from time to time, including without limitation the Shiplift Facility. "Premises" means the land plus any improvements described in Section 2.02, exclusive of any other improvements now or hereafter located on the land, notwithstand- ing that any such improvements may be determined to be affixed to, and constitute part of, the real property, and regardless of whether City or Lessee owns the improvements. "Prior Lease" means the Lease Agreement effective as of September 22, 1988, as amended, between City and Lessee, a memorandum of which was recorded at Book 53, Page 255, Seward Recording District, Third Judicial District, State of Alaska. "Rent" means an amount equal to$66,052 per year, adjusted as provided in Article Ill. "Rent Adjustment Date" means January 1, 2000 and January 1 of every fifth year thereafter. "SM IC" means the Seward Marine Industrial Center, consisting of the area shown on the site map in Exhibit A hereto. City of Seward Ground Lease Page 4 AMM 001 02 020115 , . . "Ship lift Facility" means the Syncrolift Ship lift System in the SMIC, including the mechanical shiplift and all associated equipment, all upland rails not located on the Premises or other leased property,the side transfer cradle assembly, the shiplift dock and 33 connected cofferdam cells comprising the south breakwater. ARTICLE 2 Lease of Premises Section 2.01 - Lease of Premises. City leases the Premises to Lessee, and Lessee hires the Premises from Lessor, in accordance with this Lease for the Lease Term. Section 2.02- Legal Description. The legal description of the Premises is included in Exhibit B hereto. Notwithstanding any contrary provision in the Prior Lease, any improvements constructed by Lessee or its predecessor on the Premises under the Prior Lease and existing at the commencement of this Lease shall remain Lessee's property subject to the other terms of this Lease. City shall receive no compensation for the improvements other than the performance of Lessee's covenants expressed in this Lease. Section 2.03 - Lease Term. The Lease Term commences April 25, 1995, and ends at midnight on June 30, 2009, unless sooner terminated as provided herein. The Lease Term is subject to extension at the option of Lessee as provided in Section 2.04. Section 2.04 - Extension of Lease Term. Lessee may, at its option, extend the Lease Term for one or more additional periods which shall not, in total, exceed 20 years. Notwithstanding any other provision of this Lease, no extension of the Lease Term shall cause the Lease Term to expire later than midnight on June 30, 2029. Lessee shall exercise the option granted by this section in the manner, and subject to all of the conditions, set forth in this section. (a) The exercise of an option to extend the Lease Term under this section shall be subject to the following conditions: (1) Lessee shall notify Lessor of the exercising of the option in the manner specified in (b) of this section. (2) Before exercising the option, Lessee shall submit to City plans for improvements to the Premises or the Shiplift Facility, an engineer's or architect's estimate of the cost of the improvements, and a schedule for acquiring, construct- ing and installing the improvements, and City shall have given Lessee its written approval of the proposed improvements. City of Seward ismw Ground Lease Page 5 AMM00162 020116 . . (3) Lessee shall designate the portion of the proposed improvements that it intends to finance with borrowed funds, and shall provide City with a written commitment from a financial institution to lend the designated amount to Lessee. (4) Lessee shall submit to City a written estimate prepared by the financial institution that has committed to lend funds for the improvements of the number of years required to amortize the borrowed amount, with interest, in payments totalling not less than $100,000 per year. (5) The exercise of the option shall not extend the expiration date of the Lease Term to a date later than five years after the date the borrowed amount, with interest, will be amortized under the estimate provided under (a)(4) of this section. (b) Lessee shall give City written notice of the exercise of an option to extend the Lease Term under this section, with the documents required under (a) of this section, not later than 180 days before the date of expiration of the Lease Term, as previously extended. (c) An extension of the Lease Term under this section shall become effective on the date of the closing of the financing of the improvements described in the documents Lessee submits to City to exercise the option. Section 2.05- Covenant of Quiet Enjoyment. Subject only to the provisions of this Lease, Lessee shall have the quiet enjoyment and possession of the Premises for the uses authorized hereunder for the full Lease Term. City owns the Premises free and clear of all encumbrances and is fully empowered to enter into this Lease. ' ARTICLE 3 Rent Section 3.01 - Amount of Rent. Lessee shall pay to City without abatement, deduction or offset (except as provided in Section 3.05) annual rent in an amount equal to the Rent. Section 3.02 - Payment of Rent. (a) Rent shall be payable in advance in four equal quarterly installments on January 1, April 1, July 1 and October 1 of each year; provided that the first rent payment shall be due on the first day of the Lease Term, and the first and last rent payments shall be prorated based upon the number of days in the period for which the rent is due. City of Seward Ground Lease Page 6 AMM001 B2 020117 (b) Upon the determination of the adjustment to Rent under Section 3.03, Lessee shall pay to City the amount, if any, by which the adjusted Rent exceeds Rent previously paid, and City shall pay the Lessee the amount, if any, by which Rent previously paid exceeds the adjusted Rent. Section 3.03 - Adjustment to Rent After Appraisal. The Rent shall be adjusted to the fair market rental value as of the commencement of the Lease Term, of the Premises as a vessel construction and repair facility, exclusive of improvements placed thereon by Lessee or its predecessor under this Lease or the Prior Lease, but including all improvements made by City before or after the commencement of the Lease Term. Not later than 180 days after the commencement of the Lease Term, City shall provide Lessee with a copy of the report of an independent MAI appraiser engaged at City's expense stating the appraiser's determination of the fair market rental value of the Premises under this section as of the commencement of the Lease Term. The appraiser shall be instructed to take into account in determining the fair market rental value of the Premises (i) the value of the shiplift transfer rails on the Premises, and (ii) the Premises's proximity and access to the Ship lift Facility. Unless Lessee objects to City's appraisal as provided below, the Rent shall be adjusted to the fair market rental value determined in the appraiser's report as of the commencement of the Lease Term. The fair market rental value determined under the preceding paragraph shall be final unless Lessee (i) notifies City in writing that it objects thereto within 30 days following 61.• City's delivery or mailing of its appraiser's report; and (ii) at its own expense engages a second independent MAI certified appraiser to determine the fair market rental value of the Premises, and provides City with a copy of the appraiser's report not less than 60 days after its receipt of the report of City's appraiser. Lessee's appraiser shall be instructed to take into account in determining the fair market rental value of the Premises (i) the value of the shiplift transfer rails on the Premises, and (ii)the Premises's proximity and access to the Ship lift Facility. If the fair market rental value determined by Lessee's appraisal varies from the fair market rental value determined by City's appraisal by no more.than 15 per cent, the Rent as of the commencement of the Lease Term shall be the average of the fair market values determined under the two appraisals. If the fair market rental value determined by Lessee's appraisal varies from the fair market rental value determined by City's appraisal by more than 15 per cent, the Rent as of the commencement of the Lease Term shall be the average of the fair market values determined under the two appraisals, unless either party notifies the other in writing within 15 days of City's receipt of Lessee's appraiser's report that the fair market value shall be determined by a third appraisal. Upon written notice that fair market rental value shall be determined by a third appraisal, each party shall instruct its appraiser to select with the other party's appraiser a third MAI certified appraiser. The third appraiser shall determine the fair market rental City of Seward Ground Lease Page 7 AM moo1132 020118 j value of the Premises as of the commencement of the Lease Term in accordance with this section, based upon a review of the two previous appraisers' reports and any additional investigation the third appraiser deems necessary. The Rent shall be adjusted to the fair market rental value determined in the third appraiser's report as of the commencement of the Lease Term. Each party shall bear half the cost of the third appraisal. Section 3.04 - Periodic Adjustments to Rent. On each Rent Adjustment Date, the Rent shall be adjusted to the fair market rental value as of the Rent Adjustment Date, of the Premises as a vessel construction and repair facility, exclusive of improvements placed thereon by Lessee or its predecessor under this Lease or the Prior Lease, but including all improvements made by City before or after the commencement of the Lease Term. Not later than 90 days before the Rent Adjustment Date, City shall provide Lessee with a copy of the report of an independent MAI appraiser engaged at City's expense stating the appraiser's determination of the fair market rental value of the Premises under this section as of the Rent Adjustment Date. The appraiser shall be instructed to take into account in determining the fair market rental value of the Premises (i) the value of the shiplift transfer rails on the Premises, and (ii) the Premises's proximity and access to the Ship lift Facility. Unless Lessee objects to City's appraisal as provided below, the Rent shall be adjusted to the fair market rental value determined in the appraiser's report as of the Rent Adjustment Date. sod The fair market rental value determined under the preceding, paragraph shall be final unless Lessee (i) notifies City in writing that it objects thereto within 30 days following City's delivery or mailing of its appraiser's report; and (ii) at its own expense engages a second independent MAI certified appraiser to determine the fair market rental value of the Premises, and provides City with a copy of the appraiser's report not less than 60 days after its receipt of the report of City's appraiser. Lessee's appraiser shall be instructed to take into account in determining the fair market rental value of the Premises (i) the value of the shiplift transfer rails on the Premises, and (ii) the Premises's proximity and access to the Ship lift Facility. If the fair market rental value determined by Lessee's appraisal varies from the fair market rental value determined by City's appraisal by no more than 15 per cent, the Rent as of the Rent Adjustment Date shall be the average of the fair market values determined under the two appraisals. If the fair market rental value determined by Lessee's appraisal varies from the fair market rental value determined by City's appraisal by more than 15 per cent, the Rent as of the Rent Adjusti-nent Date shall be the average of the fair market values determined under the two appraisals, unless either party notifies the other in writing within 15 days of City's receipt of Lessee's appraiser's report that the fair market value shall be determined by a third appraisal. City of Seward Ground Lease Page 8 ANAM00182 020119 Upon written notice that fair market rental value shall be determined by a third appraisal, each party shall instruct its appraiser to select with the other party's appraiser a third MAI certified appraiser. The third appraiser shall determine the fair market rental value of the Premises as of the Rent Adjustment Date in accordance with this section, based upon a review of the two previous appraisers' reports and any additional investigation the third appraiser deems necessary. The Rent shall be adjusted to the fair market rental value determined in the third appraiser's report as of the Rent Adjustment Date. Each party shall bear half the cost of the third appraisal. Section 3.05 - Rent Credits for Deferred Maintenance. Lessee shall be allowed as a credit not exceeding the amount of Rent due from the commencement of the Lease Term through April 25, 2000, for the amount actually expended by Lessee through April 25, 2000 for Deferred Maintenance or replacement of shiplift cables. Lessee shall receive this credit as follows: (a) Lessee may deduct from any Rent payment due for the period ending on or before April 25, 2000, the amount by which (i) the amount actually expended before the earlier of the Rent due date and April 25, 2000 by Lessee for Deferred Maintenance or replacement of shiplift cables, exceeds (ii) Rent for which Lessee already has received a credit under this section. (b) At the end of each Fiscal Year ending before January 1, 2001, City shall refund to Lessee from Rent due and paid on or before the end of that Fiscal Year the amount by which (i) the amount actually expended before the earlier of the end of the Fiscal Year and April 25, 2000 by Lessee for Deferred Maintenance or replacement of shiplift cables, exceeds (ii) Rent for which Lessee already has received a credit under this section. • ARTICLE 4 Use of Premises Section 4.01 - Use of Premises. The parties agree that the Premises is one of few parcels within the SMIC suitable for vessel repair and construction and that City has made a substantial investment in public facilities adjacent or in proximity to the Premises with the objective of providing opportunities for businesses such as Lessee's to operate. Lessee shall use the Premises only for vessel repair and construction, and purposes incidental thereto. Lessee shall operate a vessel repair and construction facility on the Premises continuously during the Lease Term. Lessee is not operating a vessel repair and construction facility continuously on the Premises if, during any period of 60 consecutive days, Lessee performs no vessel repair or construction work on any vessel on the Premises. City of Seward tr. Ground Lease Page 9 AMM001 B2 020120 Section 4.02 - Specific Use Restrictions. Lessee shall not commit any waste of the Premises or the improvements thereon. Lessee shall use, operate and maintain the Premises and the improvements thereon in accordance with all laws and regulations governing such use, operation and maintenance. Lessee will not use the Premises in any manner or construct any improvements thereon which would constitute a public nuisance or which would interfere with the use of other land in the SMIC. Section 4.03- Platting. Lessee caused the Premises to be surveyed at its expense under the Prior Lease. City shall at its expense prepare and submit to the Kenai Peninsula Borough for approval and recording a final plat including and identifying the Premises as a separate parcel, based upon the survey performed by Lessee. Section 4.04 - Land Use Approvals. Lessee at its sole expense may'prepare and submit any application for rezoning, conditional use approval, subdivision or other land use permit approval that it deems necessary or appropriate for the uses of the Premises permitted under this Lease. City shall from time to time upon request of Lessee execute such documents as be necessary to apply for any such approval Nothing in this section shall require City to incur any expense, or to take any action as a land use regulator. Section 4.05 - Easements and Rights-of-Way. Either party to this Lease shall from time to time upon request of the other party execute and deliver such documents as may be necessary to grant street, water, drainage, gas, power line and other easements and rights-of-way as are necessary to provide for orderly development of the SMIC inclucfing the publicly owned facilities therein. The costs of relocating any public easements or restrictions of record including any relocation of public road, utility, or other easements, shall be at the sole cost and expense of the party requesting the relocation. City shall not refuse reasonable requests for such relocations provided those requests do not interfere with or inhibit the overall development of the SMIC. Any easements or rights of access granted to Lessee by City need not be exclusive to Lessee. Any and all easements, rights of access or rights-of-way which City may choose to grant at some future date shall not unreasonably interfere with the permitted uses of the Premises by Lessee. Section 4.06 - Environmental Matters. Lessee covenants and agrees as follows: (a) Lessee will not cause or permit the Premises to be used to generate, manufacture, refine, transpbrt, treat, store, handle, dispose, transfer, produce or process any Hazardous Substance, except in compliance with all applicable Environmental Laws, nor shall Lessee cause or permit, as a result of any intentional or unintentional act or omission on the part of the Lessee or any other user or occupant of the Premises, the release of any Hazardous Substance onto the Premises. (b) Lessee will at all times in all respects use its best efforts to comply, and will use its best efforts to cause all other users or occupants of the Premises to comply, with City of Seward Ground Lease Page 10 AMMOO1B2 020121 II- all Environmental Laws, including without limitation undertaking the following specific actions: (i) Lessee will, at its own expense, procure, maintain in effect and comply with all conditions of any and all permits, licenses and other governmental and regulatory approvals required by all Environmental Laws, including without limitation permits required for discharge of (appropriately treated) Hazardous Substances into the ambient air or any sanitary sewers servicing the Premises; and (ii) except as discharged into the ambient air or a sanitary sewer in strict compliance with all applicable Environmental Laws, any and all Hazardous Substances to be treated and/or disposed of by the Lessee will be removed and transported solely by duly licensed transporters to a duly licensed treatment and/or disposal facility for final treatment and/or disposal (except when applicable Environmental Laws permit on-site treatment or disposal in a sanitary landfill). (c) If the presence, release, threat of release, placement on the Premises, or the generation, transportation, storage, treatment or disposal at the Premises of any Hazardous Substance (i) gives rise to liability (including without limitation a response action, remedial action or removal action) under any Environmental Law, (ii) causes a significant public health effect, or (iii) pollutes or threatens to pollute the environment, Lessee shall, at its sole expense, promptly take any and all remedial and removal action necessary to clean-up the Premises and mitigate exposure to liability arising from the Hazardous Substance, whether or not required by law. (d) Lessee shall maintain a complete file, which may be inspected at any reasonable time by City containing copies of all correspondence, permits or other material between Lessee and any federal, state or other governmental authority. (e) Lessee shall give City within 24 hours (i) written notice and a copy of any notice or correspondence it receives from any federal, state or other governmental authority regarding Hazardous Substances on the Premises or which affect or will affect the Premises, or expenses or losses incurred or expected to be incurred by Lessee or any government agency to study, assess, contain or remove any Hazardous Substances on or near the Premises, and (ii) written notice of any knowledge or information Lessee obtains regarding the release or discovery of Hazardous Substances on the Premises. (f) Lessee agrees to indemnify, hold harmless and defend City,and the officers, employees and agents of City, from and against any and all claims, demands, damages, losses, liens, liabilities, penalties,.fines, lawsuits and other proceedings and costs and expenses (including attorneys' fees), arising directly or indirectly from or out of, or in any way connected with: (i) The failure of Lessee to comply with its covenants and agreements contained in this section; am. City of Seward Ground Lease Page 11 AMM001132 020122 • 1 (ii) Any activities on the Premises which directly or indirectly result in the Project becoming contaminated with Hazardous Substances; (iii) The discovery of Hazardous Substances on the Premises; and (iv) The clean-up of Hazardous Substances from the Premises without regard to (1) the nature of the activities producing the Hazardous Substances, (2) the identity of the person conducting such activities, and (3)the time such activities took place (whether prior or subsequent to Lessee's acquisition of the Premises). (g) The provisions of this section, including the obligation to indemnify, shall survive the termination or expiration of the Lease Term. (h) Nothing in this section shall prejudice or impair the rights or claims of Lessee against any person or entity other than City with respect to the presence of Hazardous Substances as set forth above. ARTICLE 5 Construction by Lessee • Section 5.01 - Construction. Lessee may erect, maintain, alter, remodel, reconstruct, rebuild, build and replace improvements on the Premises, subject to the following conditions: (a) Lessee shall not be in default under this Lease; • (b) Lessee at its sole expense shall obtain all approvals required for the work from governmental agencies having jurisdiction; (c) Lessee shall bear the entire cost of the work; (d) In accordance with Section 5.02,the Premises shall at all times be kept free of mechanics and materialmen's liens. (e) Lessee shall supply City with a copy of all building plans and specifications and a site plan or plans for the improvements. (f) Lessee shall (i) cause the work to be constructed in a workmanlike manner and in accordance with all applicable regulatory requirements, and (ii) cause the work to be prosecuted with diligence to completion. As between Lessee and City, Lessee shall bear the entire cost of correcting deficient or incomplete work. Nothing in this section City of Seward Ground Lease Page 12 AMM001132 020123 . , shall prejudice or impair the rights or claims of Lessee against any person or entity other than City with respect to deficient or incomplete work. (g) All such work shall be directly related to and necessary to the operation or maintenance of a vessel repair and construction facility on the Premises. Section 5.02- Protection Against Liens. (a) Lessee shall not permit to be enforced against the Premises or any part of it any mechanic's or materialman's lien arising from any work of improvement, however it may arise. However, Lessee may in good faith and at Lessee's own expense contest the validity of any such asserted lien, claim or demand, provided Lessee has furnished the bond required in AS 34.35.072 (or any comparable statute hereafter enacted for providing a bond freeing the Premises from the effect of such a lien claim). Lessee shall defend and indemnify City against all liability and loss of any type arising out of work performed on the Premises by Lessee, together with reasonable attorneys' fees and all costs and expenses incurred by City in negotiating, settling, defending, or otherwise protecting against such claims. (b) If Lessee does not cause to be recorded the bond described in AS 34.35.072 or otherwise protect the property under any alternative or successor statute, and a final judgment has been rendered against Lessee by a court of competent jurisdiction for the foreclosure of a mechanic's or materialman's lien claim, and if Lessee ii••• fails to stay the execution of the judgment by lawful means or to pay the judgment, City shall have the right, but not the duty, to pay or otherwise discharge, stay, or prevent the execution of any such judgment or lien or both. Lessee shall reimburse City for all sums paid by City under this paragraph, together with all City's reasonable attorneys' fees and costs, plus interest on those sums, fees, and costs at the rate of 10.5 percent per year from the date of payment until the date of reimbursement. (c) City may give notice of non-responsibility for any work performed by Lessee on the Premises. (d) On completion of any substantial work of improvement during the Lease Term, Lessee shall file or cause to be filed a notice of completion. Lessee hereby appoints City as Lessee's attorney-in-fact to file the notice of completion on Lessee's failure to do so after the work of improvement has been substantially completed. Section 5.03 - Fencing on Premises. Lessee, at its own expense, shall construct a fence around the perimeter of the Premises as specified in Exhibit C. Lessee shall complete construction of the fence not later than July 30, 1995. City of Seward Ground Lease Page 13 AMMOO 182 020124 J ARTICLE 6 SMIC and Public Port Facilities Section 6.01 - Adequacy of Port Facilities. Lessee has reviewed the plans, specifications and actual improvements made to City's Port Facilities, and has independently determined that they are sufficient for Lessee's intended uses of the Premises. City makes no representations or warranties as to the fitness of any particular part or the whole of City's Port Facilities for the uses of the Premises intended by Lessee. Section 6.02 - Other Leasing by City. Nothing in this Lease shall preclude City from leasing real property, including without limitation real property at the SMIC, to other parties who may compete with Lessee, or from seeking other tenants who might be interested in leasing the Premises upon termination or expiration of the Lease Term. Section 6.03- Operation by Lessee. Lessee shall move all vessels from the Shiplift Facility to the Premises by means of a suitable rail-mounted ship cradle towing system. The cradle and towing system and rails on the Premises must be certified as meeting acceptable engineering standards for synchrolift/rail loading and must meet annual Lloyd's registry class rating (Section 4, Lloyd's Register of Shipping, 1981-mechanical lift .ai docks) by an independent surveyor acceptable to Lloyd's prior to any use on the Shiplift Facility. The cradle system (and the towing device,to the extent required by classification or inspection societies) must be inspected and re-certified in accordance with the requirements of Lloyd's Classification Society as a condition precedent to continued use of the Premises by Lessee. Section 6.04 - Repairs on Shiplift Facility Platform. Lessee may not perform any vessel repair or construction work on the Shiplift Facility platform, except for propeller changes, shaft changes, surveys, zinc replacements, light steel work, and repairs or replacements of transducers or rope guards. All work performed by Lessee on the Shiplift Facility platform shall comply with all requirements of the State Department of Environmental Conservation concerning intrusion into the water. Under no circumstances will Lessee perform any sandblasting or heavy steel work on the Shiplift Facility platform. Section 6.05 - Port and Harbor Tariff. Subject to any applicable provisions of the Operating Agreement, City may amend the regulations and fees for use of its Port Facilities from time to time, provided no such amendment may impose any greater burden or higher rate upon Lessee than upon any other similar user of the City's Port Facilities. i J City of Seward Ground Lease Page 14 AMM001 B2 020125 ARTICLE 7 Termination or Expiration of Lease Term Section 7.01 - Lessee's Duty to Surrender. At the expiration or earlier termination of the Lease Term, Lessee shall surrender to City the possession of the Premises. Surrender or removal of improvements, fixtures and trade fixtures shall be as directed in Section 7.03. Lessee shall leave the surrendered Premises and any other property in good and broom-clean condition except as provided to the contrary in provisions of this Lease on maintenance and repair of improvements. All property that Lessee is required to surrender shall become City's property at the expiration or earlier termination of the Lease Term. All property that Lessee is not required to surrender but that Lessee does abandon shall, at City's election, become City's property at the expiration or early termina- tion of the Lease Term. If Lessee fails to surrender the Premises at the expiration or earlier termination of the Lease Term, Lessee shall defend and indemnify City from all liability and expense resulting from the delay or failure to surrender, including, without limitation, claims made by any succeeding tenant founded on or resulting from Lessee's failure to surrender. Section 7.02 - Holding Over. This Lease shall terminate without further notice at expiration of the Lease Term. Any holding over by Lessee after expiration shall not constitute a renewal or extension or give Lessee any rights in or to the Premises except as otherwise expressly provided in this Lease. Section 7.03-Disposition of Improvements. At the expiration or sooner termination of the Lease Term: (a) City may, at its option, demand that Lessee remove from the Premises any or all improvements, fixtures, inventory and equipment. A demand to take effect at the normal expiration of the Lease Term shall be effected by notice given at any time not less than 60 nor more than 180 days before the expiration date. A demand to take effect on any other termination of the Lease Term shall be effected by notice given in or concurrently with notice of such termination or within 30 days after such termination. (b) City may, at its option, retain as its property any improvements constructed by Lessee on the Premises; provided that if Lessee is not then in default City shall pay Lessee compensation therefor as provided in Section 7.04. Notice of City's exercise of this option shall be given at the time prescribed for a notice under (a) of this section. (c) Provided Lessee is not then in default, Lessee shall have the right to remove from the Premises at its expense (i) any or all improvements that City has not elected to retain under (b) of this section, and (ii) any fixtures, inventory and equipment, provided City of Seward Ground Lease Page 15 AMM001 B2 020126 all resulting injuries to the Premises and remaining improvements are completely remedied. Section 7.04 - Determination of Compensation. If Lessee is entitled to compensa- tion for any improvements retained by City under Section 7.03(b), City shall pay Lessee an amount equal to the'documented cost of acquiring, constructing and installing the improvements, less accumulated depreciation of the improvements as reported on Lessee's federal income tax returns. Section 7.05 - Option to Terminate Lease. Upon, the expiration or sooner termination of the Operating Agreement for any reason permitted under the terms of the Operating Agreement, City shall have the option, in its sole discretion, to terminate this Lease upon 30 days' notice to Lessee. City may exercise this option by sending the required notice to Lessee at any time within one year after the expiration or sooner termination of the Operating Agreement. Section 7.06-Option to Renew Operating Agreement. At the end of the initial term and each renewal term of the Operating Agreement, Lessee shall have the option to, renew the Operating Agreement for a renewal term ending on the earlier of (i) the date five years after the expiration of the current term or renewal term of the Operating Agreement, and (ii) the date of expiration of the Lease Term. (a) The exercise of an option to renew the Operating Agreement under this section shall be subject to the following conditions: (1) The Lease Term shall not have expired before the date the renewal term of the Operating Agreement would commence. (2) Lessee shall not be in default under this Lease at the time the option is exercised. (b) Lessee shall give City written notice of the exercise of an option to renew the Operating Agreement under this section not later than 180 days before the date of expiration of the current term of the Operating Agreement. ARTICLE 8 Sublease or Assignment Section 8.01 - Assignment of Lease or Subleasing. The parties recognize that a material reason for the finding by the City Council of Seward that it is in the public interest to lease the Premises to Lessee is Lessee's experience and history as a Seward owned City of Seward Ground Lease Page 16 AMMOO1B2 020127 and operated business and prior participation in development of vessel repair and construction facilities in the City of Seward. Except as provided in Section 8.02 through 8.04, any assignment of this Lease or sublease under this Lease by Lessee shall be void, and any attempt by Lessee to assign this Lease or sublet under this Lease gives City the right immediately to terminate this Lease. Section 8.02 - Subleasing. Nothwithstanding Section 8.01, Lessee may sublet portions of the Premises for operations related to vessel repair and construction, provided that: (a) The sublessee and the terms of the sublease shall be subject to approval by City; (b) Lessee shall remain responsible for compliance with all the provisions of this Lease with respect to the subleased portion of the Premises; and (c) City shall participate in any sublease rentals exceeding the rent payable hereunder that is attributable to the subleased portion of the Premises. Section 8.03 - Assignment. Notwithstanding Section 8.01, Lessee may assign its entire interest under this Lease to a person to whom Lessee sells its vessel repair and ism : construction business, provided that the assignee and the terms of the assignment shall be subject to approval by City. Section 8.04 - Assignment of Lease for Security. Notwithstanding Section 8.01, Lessee may assign, encumber or mortgage the leasehold or improvements on the Premises, by deed of trust or other security instrument,to an institutional lender to finance the cost of improvements to be constructed on the Premises, subject to the following conditions: (a) The deed of trust shall provide that all notices under the note and deed of trust must be sent to City and that City shall have the right to cure any default if Lessee fails to do so. City shall have 30 days to cure any default after the time for Lessee to cure it has expired. Neither City's right to cure any default nor any exercise of that right shall constitute an assumption of liability under the note or deed of trust. (b) The deed of trust beneficiary shall not be liable to perform Lessee's obligations under this Lease until the beneficiary acquires Lessee's rights by foreclosure or assignment in lieu of foreclosure. After thus acquiring Lessee's rights, the deed of trust beneficiary shall be liable to perform Lessee's obligations only until beneficiary assigns or transfers the leasehold as permitted by this Lease. City of Seward Ground Lease Page 17 AMM001132 020128 (c) No assignment or deed of trust permitted under this section may cover any interest in any real property other than Lessee's leasehold in the Premises and the improvements thereon. No assignment or deed of trust permitted under this section shall secure any indebtedness other than an indebtedness of Lessee to finance improvements to be constructed or installed on the Premises. (d) After acquiring the leasehold by foreclosure or assignment in lieu of foreclosure, the deed of trust beneficiary may further assign, transfer or dispose of its interest; provided that any subsequent assignee, purchaser or transferee shall be bound by each and every term of this Lease. ARTICLE 9 Indemnity: Insurance Section 9.01 - Lessee's Duty to Indemnify. In addition to any other duty to indemnify or defend City, Lessee shall defend, indemnify and hold harmless City from any and all claims, actions and demands for death or injury to persons or damage to property, arising from the use of the Premises during the Lease Term by Lessee, j Lessee's contractors, agents, officers, employees and invitees, or the general public. Section 9.02 - Insurance Requirements. During the Lease Term, Lessee shall . procure and maintain at its expense the insurance described in this section subject to the terms and conditions set forth in this section. (a) Lessee shall procure and maintain the following insurance under this Lease: (1) Commercial general liability and automobile insurance, with limits of liability of $5,000,000 for all injuries, deaths or property damage resulting to any one person and $5,000,000 limit from any one occurrence. Coverage under such insurance shall also include explosion, collapse and underground property damage hazards. Such insurance shall include a blanket contractual liability endorsement. For non-owned watercraft of Lessee or its customers any "watercraft exclusion" in the commercial liability insurance policy shall be eliminated. Protection and indemnity insurance shall be provided with the same limits as the commercial liability insurance for the use_of Lessee-owned watercraft. (2) All risk physical damage insurance for any buildings, equipment, machinery or any other property stored or being worked on by Lessee upon the premises at replacement value rather than original cost. City of Seward Ground Lease Page 18 AMM00192 020129 • (3) Workers Compensation Insurance and insurance under the Harbor Workers and Longshoremen's Compensation Act. (4) Coverage for vessels in the care, custody or control of Lessee (ship repairer's liability) with limit of liability of $5,000,000. (5) Environmental impairment liability or pollution legal liability insurance for all off-Premises bodily injury and property damage to parties other than Lessee caused by pollution emanating from the Premises, with limit of liability of $1,000,000. (6) Marine Liability Insurance and any other insurance required under any permit or tariff of City. (b) The minimum amounts and types of insurance required under this Section shall be subject to revision in accordance with standard insurance practices, in order to provide continuously throughout the Lease Term a level of protection consonant with good business practice and accepted standards in the industry. Such factors as increases in the cost of living shall be utilized in assessing whether the minimum insurance requirements should be increased. City shall notify Lessee of any required increase in insurance coverage. (c) All insurance policies shall provide for 30 days' notice to City of cancellation and/or material change in policy terms. All such policies shall be written by insurance companies legally authorized or licensed to do business in the State of Alaska, and acceptable to City. Lessee shall furnish City, on forms supplied by City, certificates evidencing that it has procured the insurance required herein prior to the occupancy of the leased land or operation by Lessee. Nothing herein contained shall prevent Lessee or City from placing and maintaining at City's or Lessee's own individual cost and expense, additional or other insurance as may be desired. (d) Commencing on January 1, 1996, and annually thereafter throughout the Lease Term, Lessee shall procure and submit to City a written report from a reputable insurance broker acceptable to City that the broker has reviewed the types and amounts of coverage of insurance obtained by Lessee and the operations of Lessee and in the opinion of the broker the coverage complies with Lessee's obligations under this Lease. (e) All of the insurance policies required above as well as any other insurance carried by Lessee or City shall provide that the insurers waive their rights of subrogation 1.7 against City and Lessee and their respective officers, servants, agents or employees. Lessee further agrees to waive and agrees to have its insurers waive any rights of subrogation (whether by loan receipts, equitable assignment or otherwise), with respect to deductibles under such policies and with respect to damage to equipment including the loss of use thereof, whether insured or not. Lessee shall also name City as an v" City of Seward Ground Lease Page 19 AMM001132 020130 011111M. • • Mel additional insured on the general liability insurance policy maintained by Lessee as required above, excluding-coverage for claims resulting from City's sole negligence. Lessee shall promptly and without request by City supply City copies of all insurance binders and policies. ARTICLE 10 Condemnation If all or any part of the Premises is condemned for a public use by any government agency or other duly authorized entity, City and Lessee shall each make a claim against the condemning or taking authority for the amount of any damage incurred by or done to them respectively as a result of the taking. Neither Lessee nor City shall have any rights in or to any award made to the other by the condemning authority; provided, that in the event of a single award to City which includes specific damages for loss of Lessee's leasehold interest, City shall transmit to Lessee the amount of such specific damages so found, if any. If part, but not all of the Premises is condemned for public use, Lessee shall make a good faith determination as to whether or not the taking of the part of the Premises designated for condemnation will prevent it from continuing to operate on the Premises. If Lessee determines in good faith that the condemning of such part of the Premises will prevent it from continuing to operate on the Premises, Lessee may notify City in writing to this effect, and this Lease shall then be terminated for all purposes effective 15 days from the date Lessee sends such notice to.City, or at such other later date as Lessee shall specify in its notice, and such termination shall be treated in the same manner as a termination at the expiration of the Lease Term. Lessee shall, as a condition precedent to such termination, remove all encumbrances, debts and liens to which the Premises is subject. If at the time of such partial taking for public use, Lessee determines that such partial taking will not prevent it from continuing to operate, then Lessee and City shall negotiate an equitable and partial abatement of the rent to be effective on the actual date when Lessee is effectively prevented from utilizing the condemned land. ARTICLE 11 Default; Remedies Section 11.01 - Events of Default. Each of the following shall be an act of default under this Lease and the terms "acts of default" and "default" shall mean, whenever they are used in this Lease, any one or more of the following events: City of Seward Ground Lease Page 20 AMMO:31E72 020131 6.• (a) Failure by Lessee to pay promptly when due the rent required to be paid under this Lease. (b) Failure by Lessee to observe,fulfill or perform any covenants, conditions or agreements on its part to be observed or performed under this Lease for a period of 30 days after written notice specifying such failure, requesting that it be remedied, and stating that it is a notice of default, has been given to Lessee by City; provided, however, that if said default is such that it cannot be corrected within the applicable period, it shall not constitute an act of default if corrective action is instituted by Lessee within the applicable period and diligently pursued until the default is corrected. (c) The making by Lessee of an assignment for the benefit of creditors,the filing of a petition in bankruptcy by Lessee,the adjudication of Lesseeas insolvent or bankrupt, the petition or application by Lessee to any tribunal for any receiver or any trustee for itself or for any substantial part of its property; or the commencement of any proceeding relating to Lessee under any bankruptcy, insolvency, reorganization, arrangement or readjustment of debt law or statute or similar law or statute of any jurisdiction, whether now or hereafter in effect which shall remain undismissed for a period of six months from the date of commencement thereof. The foregoing provisions of this section are subject to the following limitations: if by reason of Force Majeure, Lessee is unable in whole or in part to carry out any of its agreements on its part herein contained, other than any obligation of Lessee to pay money, it shall not be deemed an Event of Default during the continuance of such inability. Lessee agrees, however, to use all reasonable efforts to remedy with all reasonable dispatch the cause or causes of its failure to carry out its obligations under this Lease; provided, that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of Lessee and Lessee shall not be required to make settlement of strikes, lockouts or other industrial disturbances by acceding to demands of opposing parties when such course is in the judgment of the Lessee unfavorable to Lessee. _ Section 11.02 - Remedies for Default by Lessee. Whenever an act of default by Lessee shall have occurred, and any applicable period for giving notice and any opportunity to cure shall have expired, City shall have the following rights and remedies all in addition to any rights and remedies that may be given to City by statute, common law or otherwise: (a) City may distrain for rent due any of Lessee's personal property which comes into City's possession. This remedy shall include the right of City to dispose of personal property distrained in any commercially reasonable manner. It shall be conclusively presumed that compliance with the procedures set forth in the Alaska City of Seward Ground Lease Page 21 AMM001132 020132 J Uniform Commercial Code (A.S. 45.09.504) with respect to sale of property shall be a commercially reasonable disposal. (b) City may re-enter the Premises and take possession thereof and, except for any personal property of Lessee which City has waived its right to distrain under sub-part (a) above, remove all personal property of Lessee from the Premises. Such personal property may be stored in place or may be removed and stored in a public warehouse or elsewhere at the cost of Lessee all without service of notice or resort to legal process, all of which Lessee expressly waives. (c) Declare this Lease terminated. (d) Collect any and all rents due or to become due from sub-tenants or other occupants of the Premises. (e) Recover,whether this Lease be terminated or not,damages incurred by City by reason of the breach or default by Lessee. (f) Recover an amount to be due immediately on breach equal to the rent reserved under this Lease discounted to the date of such breach at the rate of eight percent (8%) per year. If the Premises or any part thereof be re-let by City for the unexpired Lease Term, City shall reimburse to Lessee upon receipt an amount not to exceed the amount received by City under this paragraph. (g) If Lessee does not immediately surrender possession of the Premises after termination by City and upon demand by City, City may forthwith enter into and upon and repossess the Premises and expel Lessee without being deemed guilty in any manner of trespass and without prejudice to any remedies which might otherwise be used for arrears of rent or breach of covenant. (h) No expiration or termination of this Lease shall expire or terminate any liability or obligation to perform of Lessee's which arose prior to the termination or expiration except insofar as otherwise agreed in this Lease. Each right and remedy of City provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or beginning of the exercise by City of any one or more of the rights and remedies provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by City of any or all other rights or remedies provided for in this Lease or now or thereafter existing at law, or in equity or by statute or otherwise. City of Seward Ground Lease Page 22 Ammools2 020133 lam Section 11.03 - No Waiver of Breach. No failure by City to insist upon the strict performance by Lessee of any term, covenant or condition of this Lease or to exercise any right or remedy consequent upon a breach thereof, shall constitute a waiver of any such breach or of such terms, covenants or conditions. No waiver of any breach shall affect or alter this Lease, but each and every term, covenant and condition of this Lease shall continue in full force and effect with respect to any other then existing or subsequent breach. ARTICLE 12 Dispute Resolution Section 12.01 - Submission of Claims. All Claims by a party shall be submitted to the other party by written notice. The responsibility to substantiate a Claim shall rest with the party making the Claim. A Claim by either party must be made within 30 days of the event giving rise to the Claim, or the date the claimant first recognizes the condition giving rise to the claim, whichever occurs later. If a Claim is not resolved within 60 days of its submission under this section, the claimant may submit the claim to Arbitration under Section 12.02. Unless the parties agree otherwise in writing, a claim is waived if not submitted to Arbitration under Section 12.01 within 90 days of the giving of the initial ' written notice of the Claim under this section. Section 12.02 - Arbitration. (a) All Claims shall be decided by Arbitration, in accordance with this section. A Claim may not be submitted to Arbitration unless it was the subject of a timely notice under Section 12.01. (b) Consent Panel. The party desiring Arbitration of a dispute shall give written notice to that effect to the other party specifying in such notice the name and address of a person to serve as an arbitrator on its behalf.Within 15 days after receipt of such notice the other party shall give written notice to the first party specifying the name and address of a person designated to serve as an arbitrator on its behalf. If neither party has objected to the other's designation within fifteen (15) days of the notice by the second party of its representative of an arbitrator, then the two chosen arbitrators (called the "consent panel") shall select a third person agreeable to both to become the third member of the consent panel. The consent panel may utilize informal techniques and hold informal hearings without reference or adherence to the rules or procedures of the American Arbitration Association. Promptly and within thirty (30) days of concluding any proceeding the consent panel shall render its written decision. It is the intent of this subsection to provide for a speedy and inexpensive resolution of disputes provided the parties agree to such a procedure. City of Seward L Ground Lease Page 23 AMM00102 020134 (c) Formal Arbitration. If either party objects, within fifteen (15) days of the second party's designation of an arbitrator to the others choice of an arbitrator pursuant to paragraph (b) above, or the first party initially decides not to use the consent panel procedure, then the matter shall be promptly referred to the American Arbitration Association in accordance with the then existing rules of the American Arbitration Association. (d) Arbitration Awards. Any award by either a consent panel or as a result or proceedings before a panel pursuant to the rules of the American Arbitration Association shall be enforceable in accordance with Alaska Statutes. Any award shall include an award of costs, interest and attorney fees. ARTICLE 13 Maintenance and Repairs of Premises Section 13.01 - Normal Maintenance. During the entire Lease Term, Lessee shall, at Lessee's sole cost, risk and expense, maintain the Premises, including any improve- ments placed thereon by Lessee, in as good condition as received or constructed by J Lessee, ordinary wear and tear excepted. Lessee shall maintain in first class condition at all times all fire, pollution and other protective equipment. Section 13.02- Inspection of Premises. City may periodically inspect the Premises and facilities constructed thereon in order to ascertain the condition of the Premises but the exercise of this right shall not imply any obligation to do so nor any obligation to do so in any particular way. Section 13.03 -Taxes. Assessments and Other Charges. Lessee shall pay all real and personal property taxes, sales taxes, special assessments, and other charges of every description levied on or assessed against the Premises, improvements on the Premises, personal property located on the Premises, the Leasehold estate, or Lessee's business operations located on the Premises, to the full extent of installments falling due during the Lease Term. Lessee shall make all such payments before delinquency and before any fine, interest, or penalty shall become due or be imposed by operation of law for their nonpayment; provided that Lessee may pay any such payment in installments where permitted by law, but shall pay any installment with interest before delinquency. Lessee may contest the legal validity or amount of any tax, assessment or charge for which' Lessee is responsible under this Lease. If Lessee contests any such tax, assessment or charge, Lessee may withhold or defer payment or pay under protest but shall protect City and the Premises from any lien by surety bond or other appropriate security. j City of Seward Ground Lease Page 24 Ammoole2 020135 , lbw Section 13.04 - Fire Protection. Lessee shall at its sole cost, risk and expense provide fire protection to its operations on the Premises and fire prevention to industry standards for risks to adjacent port facilities such that those risks are minimized. Lessee shall continue to provide and maintain industry accepted standards of fire protection such that the City of Seward's ISO rating is not degraded by reason of Lessee's operation. The parties agree that with the rapid expansion of technology in the field of fire prevention and control Lessee's obligations hereunder may vary during the term of this Lease and City may submit Lessee's compliance with its obligation hereunder to Arbitration not more frequently than once each five years. Section 13.05 - Parking. Lessee, at its own expense, shall establish one or more parking areas on the Premises and will encourage Lessee's employees to use same. The parking area or areas shall provide sufficient parking spaces to accommodate (i) all of Lessee's employees who are employed on the Premises; and (ii) all customers and other visitors to the business conducted by Lessee on the Premises; provided that the minimum number of parking spaces that Lessee shall provide on the Premises shall not be less than the minimum number of spaces required for an industrial processing, manufacturing and assembling use under City's zoning ordinance as amended from time to time. ARTICLE 14 Miscellaneous Section 14.01 -Time. Time is of the essence of each provision of this Lease. The time in which any act is to be performed under this Lease shall be computed by excluding the first day and including the last, unless the last day Is a Saturday, Sunday or a holiday, and then it is also excluded. Section 14.02 - Entire Agreement. This Lease contains the entire agreement of the parties with respect to the matters covered by this Lease, and no other agreement, statement or promise made by any party which is not contained in this Lease shall be binding or valid. Section 14.03 - Relationship of Parties. Nothing in this Lease, and no performance of either party hereunder,shall cause the relationship of the parties to be that of principal and agent, partners or joint venturers, or cause the parties to be associated in any manner other than as lessor and lessee. Section 14.04 - Covenants. All the provisions of this Lease shall be deemed as running with the land. City of Seward Ground Lease Page 25 AMM00182 020136 Section 14.05- Estoppel Certificates. Either party shall at any time and from time to time upon not less than 10 days' prior written request by the other party, execute, acknowledge, and deliver to such party, or to its designee, a statement in writing certifying that this Lease is unamended and in full force and effect (or, if there has been any amendment thereof, that the same is in full force and effect as amended and stating the amendment or amendments), that there are no defaults existing (or, if there is any claimed default, stating the nature and extent thereof); and stating the dates to which the rent and other charges have been paid in advance. Section 14.06 - Notices. All notices required or authorized to be given by either party under this Lease shall be in writing and shall be served personally or sent by registered mail as follows: City of Seward P.O. Box 167 Seward, Alaska 99664 Attention: City Manager Seward Ship's Drydock, Inc. P.O. Box 944 Seward, Alaska 99664 wok Attention: President Notice by mail shall be deemed to have been given at the time of mailing. Each of the above addressees may, by written notice to the other, designate any further or different addresses to which subsequent notices shall be sent. In addition; the parties hereto may agree to any other means by which subsequent notices may be sent. Section 14.07- Binding Effect. This Lease shall inure to the benefit of and shall be binding upon City and Lessee and their respective successors and assigns. Section 14.08 Severability. In the event any provision of this Lease shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provisions hereof. Section 14.09 - Amendments. This Lease may be amended only by a writing signed by City and Lessee. Section 14.10 - Execution in Counterparts. This Lease may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. City of Seward Ground Lease Page 26 mAows2 020137 • Section 14.11 -Applicable Law: Jurisdiction. This Lease shall be governed by and construed in accordance with the laws of the State of Alaska. Any civil action brought by any party under this Agreement shall be commenced and maintained in the Superior Court, Third Judicial District, State of Alaska, at Anchorage. Section 14.12 - Captions. The captions or headings in this Lease are for convenience only and no way define, limit or describe the scope or intent of any provisions or sections of this Lease. IN WITNESS WHEREOF,the parties have executed this Agreement as of the date first written above. City: Lessee: CITY OF SEWARD SEWARD SHIP'S DRYDOCK; INC. lawn_ze Tyler/Jones d.r) Ja es T. Pruitt City Manager President ATTEST: 0`‘‘A, 4. A ... ... _ ci.-4pckroilii:-.0 1. b..e s-L.Linda S. Murphy, CMC/AAE • •• City Clerk • ( SEAL 71, •-•-- .1 :7 .41■ 1.55:'`:C:Ve Aca. .,CS'S APPROVED AS TO FORM: .....1... NII,1„:e OF F+V.:0> -#1.1,11110-% WOHLFORTH, ARGETSINGER, JOHNSON & BRECHT Attorneys for the City of Seward Thomas F. Klinkner City of Seward Ground Lease Page 27 AMM001 92 020138 J STATE OF ALASKA ) ss. THIRD JUDICIAL DISTRICT The foregoine • trument was acknowledged before me this day of June 1995, by Tyler Jones, City Man.:- of the City of Seward, Alaska, on behalf of the City. Notary for the - of Alaska • My Commission Expire . STATE OF ALASKA ) ss. THIRD JUDICIAL DISTRICT The foregoing instrument was acknowledged before me this lq day of June 1995, by James T. Pruitt, President of Seward Ship's Drydock, Inc., • an Alaska corporation, on behalf of the corporation. - `\\ ■CIA • ,/e)/'* 0 TA • Notary for the State of Alaska .•m•S My Commission Expires: 3S (c? = • c'ao0-* `A. •cp:s4r■•.` //1,01/I° City of Seward Ground Lease Page 28 AMM00182 020139 •Im rJ1t • • Unsttbdivided Rtmaind$r • 17.376 AC. s • • • • I 595.59' Seward Ship's Drydock . . Existing Lease Parcel . . • , T I'• at t o N( Lot 1,Block 7, •Fourth of July Creek Subdivision, • S • l'i W Seward Marine Industrial Center r ; `'+ f+ co I. m� a. • 5.811 AC.• z Z n i . • 50' Utility r Easement r34'13'llr i 516.00' . •U tQ i —383.13' --1 O '� y I I u 103.19' _...._•,.• ..0 t3 PARCEL j.4 go t- _ T'_- 11(b, E� Ur►auedivtdea Ramat/War A 1 � N —..\ . W I cy - .. ...'1-ri:1 Av..; '1 h YJ Portia.of Trad A(Sorrel Rd) . . I 'd<Porttoe of Block R I ; •IH of Jaty Credo Sabd I '01 1 SMIC I ;0' • I 1 Z . Z • .1ogk_'2d �— --- --� found 02 ft. Ti. .. 0' Utility Easement south of trio ..1 3 • • , u ' .. L___..._, '� li 2'47'a PARCEL a.. i40,22, Portion of Block 7,• E I PI ts:• Ilk of July Creek Sabd c I `i • VI N SMIC ' s 0� ,7 IL CO ti+o N tD w 95 n as 60'.'1.4 vi41 Z • .. 'S t�it .• •�r 40. 3 _2792 N cn , • z . 't a. 0 . ,, . 'k • rs NO09'0R7`aEd,. �.• \ Proposed Seward S•h—ip 'a Drydoek M— "`� • �. — 280.83' • Lease Expansion :A "� — '� Attachment A 4,3. �'" 1- • . Seward Ship's Drydock, Inc. +I.a. r; .... ''' . ''`_,'4 Lease Amendment No 3 .a n�n140 ,iii --------------- . . • , - EXHII A - DESCRIPTION OF S1‘,I1C SEWARD MARINE INDUSTRIAL CENTER CITY OF SEWARD, ALASKA LEASE SITES . . ,- "s---77 -, El gil C.: —— — 4.27 1 1.-Cji‘,' -f- ''..:`' ) :I?.:t. 1,..;:;..1;,-,':•,i'.!-‘,'f:.;-\*;•..;::;:;;),P.. r-s.:';,1:f 2 il^--"Z 1,z-,`",';-',-, L-.!-,- ,.;..-,=..z:',‘!-,i-;',=,-,•-,,z;..•..4.-':-1 r_s_zi:.-,,Q.;;:f."!..2-,-,-:',•:' 0 ii::‘,,,::::::::.:7".z.:',-';‘'.-..';-,- ;.,,2=;;-•:,-,-.....', v.?,::-:!.,-,-,:-,;.,:.,:,;•....-,;;,-. j Am::::::::-‘,:‘,..-,;..t_,•:..,-,,-,1: .-s. 7,i.z7,) s-,-‘,‘'.•4,vz,f..s-‘,•,---; 1 0,,,,;:ix::::.,!:i,-.-:...-,,,-;,-::::./.--,c-,•',f,‘c,•-,i- 1-is-•,, ,;s,,Ls„. ,s..., • . • SE L-1-15 ot4 AV F..pki E -,iii .7.1.+.f3.; -ti:"..‘; ,!,,2:1,c-f-sie'.;;;;'-‘701%%;,; v,,....:-,;z :,.4,,-,•-_ z.!-;;;i .--,- `,:.=.- s;‘-‘:-, 1s,:, Fi',;f2i -,,-,2:i.::.:t. t;.:;;=,1- ;•:‘,..: ,:::: .,.,; •; ‘,3,•.::; -t.s, .-':-,s ,„',-1-,-..,-;:l\--i= -z., -, ‘ ‘,..,,,-,,,-, :--,_ys...,, c„..-.,,_,:-.,..:,:., I,'-':;%.--■'%.'-'V 1,1•IC `-0,6,-,■?...--:.s__,-sL,-,‘":-,!::,,,,,,;c.v. —..;-,,,f f,,,,-tp f.7._- .,.:,‘,-,1c,z,■.!-,z„-.- / -<-,-•.-,A31.! ,....---, ,`-•..-74,,•fle,J1 7',,-,-.••,•1*.-0;'• Ocel-I Pod< mdirrArge AVENUE ----- .,.:.::;•••-• ; ' ... 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'/„....‘-.--,-,..•3_,,../,..!.;-, ' .`,' '-t',.• ".-s-;;;-'-'‘-:■-*".‘‘,-f.:*--s- 1.---;,-° ‘`-',"-!-1--'sr'',I`-;ti-i‘c P ---..:..7.. ,,.:;::-, -,f-‘,...=,-,-7,C1:2,-: ,■;23 •-■::st-4",'',':.:',--if-so,.-',■- • .50Raet- ROAD D-R, (, J 0 z_ :. . .. KEY: ;:.4e. LEASED ,,,..: 1,:,-.;. AVAILABLE FOR LEASE 020141 W�w ^ Commencing at the northeast corner olUruted States Survey No. 4827 from a 5/8^ x 30^ rebar with an aluminum cap \ucahcd, thence along the easterly line of said USS 4827. South 00"]4'|3" East 1'458.02 feet; thence leaving said easterly line at a right angle thereto, South 89'25'50" West 850.80 feet to the TRUE POINT OF BEGINNING; thence South 80"25'50" West 425.00 feet: thence South O0"}4'il'' East 6Uj.0U feet;thence North 89"25'5O" East 425.00 feet; thence North O0"34'\3" West 605.80 feet to the TRUE POINT OF BEGINNING. containing art area of 257.125 square het more or less. Said property is located at 3306 Sorrel Road within the Seward Marine Industrial Center. at Fourth of July Creek and is also described as Lot 1. Block 7. Seward Marine Industrial Center. Fourtbof}uly Creek Subdivision(preliminary p|a\)' all within the Seward Recording District. Third Judicial District, State of Alaska. �m~ / � \ 020142 a•••■ . . all 4., ' b— -•\p- 1 NJ\ C --). I '' q A o , ,.. .,„ -.1.y. I '• -er; !", ai 1+- Pfli cR.X 851 r; \NW S T tn° Exhibit C - Fencin S ecifications 2 ci , vl • N i J. co',34'/3e.W. 605.00, I 11,4° i a I 114 ii I 4- • ,/,ri ' EWARC) )id I I -'2' •. SHIF,' ,.• i i PRNEXYK, ink.. I .IS 'Pq ___ / 1 , I i El vi . La ' .5, lc° 49. , cr, Hi Is I I CsTIZ til i 1 I 4/ la I1 1 4- fil g j cz•34v/3'e. 46:co,i , 49- la - 0 ..ii : 1;' I -r-RANe7Ff5R 1 I I Its—FLNcE. WILL- F3E• 0 F _ I 1 _ - ; . I ii iii 1- CAAINI 1.-4 KIK con.is-r-Rucrion1 ',' AT A MINIIMIJM OF 8' I Fi i1/4.1 AL- D E‘7IC.v NI FOR 1 I Ann,ALA- Al-rSoaATE2 PARTS L1J I. ii 1:1 , • oF -T14E yrR dcnyzE ARE > I i < 'I if EH :a LI I 1_15,1r=cr ID.APPq_ OF Grry. I i I 0 IN I • ../x rl 6 • Li :L.:. _j7.-• f 1 IL H — II) I 1 111 M 111 VliiF1 4 . g il.I ./:• /,---.-. /-•'... .,..J , ----. ill • / • , til Ow Iii beEl rOR 1C7Fi.rriFiCAliOn.i Iii --- ti.: El • PLIRPDi E °NILS. -rF-11 :ft 14 P. 14-2 Noi— A, z2URVE\/. _I . 1 LI • , c •1.• i ••10 020143 AGREEMENT TO EXTEND GROUND LEASE This Agreement is between the City of Seward, Alaska, an Alaska municipal corporation ("City"), whose address is P.O. Box 167, Seward, Alaska 99664, and Seward Ship's Drydock, Inc., an Alaska corporation ("Lessee"). whose address is P.U. Box 944 Seward, Alaska 99664, who are lessor and lessee, respectively, under that certain Ground Lease dated April 25, 1995 of certain real property located within the Seward Marine Industrial Center, Seward, Alaska (the "Lease"). The City of Seward and the Lessee certify that certain improvements have been completed that are necessary to extend the Lease Term in accordance with Ground Lease Amendment No. 4 dated January 14, 2010. Lessee installed certain capital improvement projects at the City Ship Lift Facility: Hoist Pawl Solenoid Upgrade, SMIC Cell and Dock Pile Coating, Control System Upgrade, and Cathodic Protection System. In full consideration of the aforementioned improvements by the Lessee, the City and Lessee agree that the subject lease will be extended commencing July 1, 2016 and expiring June 30, 2040. 4 Dated this II day of 2012 City: Lessee: CITY OF SEWARD SEWARD SHIP'S DRYDOCK, INC. 1119Z2 ames Hunt Ja -s T. Pruitt City Manager President ATTEST: + ++ 0 s; 4408�4°00 J hanna Kinney . City Clerk �.� State of Alaska t�'p�.`° °��•sat°'':,Q+ tia°+ )$$. '9# *111'1' Third Judicial District The foregoing instrument was acknowledged before me this ljLlday , 2012 by James Hunt, City Manager of the`i�g reftypi an Alaska corporatio on,bef of the cor oration. t= Notary in a d for Ala ka fsU A,„, w My commis ion expires:_()r) - I'-j : L3 4rrofpy,1;s rir //i `♦ L. rljt !i'lll�lo��� State of Alaska ) )ss. Third Judicial District The foregoing instrument was acknowledged before me this la' day of Pruitt, President of Seward Ship's Drydock, Inc.an Alaska corporation,on behalf of the corporation. �.li l/(I cLf:C�'4 , ) (,> (111� Notary in and for Alaska ' J Srryy My commission expires: //c.:;—//' (LIM P2/4.2t .; /IS:c 2/ NOTARY * PUBLIC zt TF 0 F N�'� AGREEMENT TO EXTEND GROUND LEASE This Agreement is between the City of Seward, Alaska, an Alaska municipal corporation ("City"), whose address is P.O. Box 107, Seward, Alaska 90664. and Seward Ship's Drydock, Inc., an Alaska corporation /"Lenoea"\, whose address is P.O. Box 944, 8exvanj, Alaska 98064. who are lessor and |ensee, reapactive|y, under that certain Ground Lease dated April 25, 1995 of certain real property located within the Seward Marine Industrial Center, Seward, Alaska (the "Le8ae"). Lessee certifies that it has completed the improvements necessary to extend the Lease Term in accordance with the Decision and Award dated December 23, 2008. Lessee installed a new cathodic protection system for the Ship lift Facility, and did not obtain financing for the improvement. Pursuant to the Decision and Award, the parties agree that "this extension period will commence July 1. 2UO8 and expire June 3O. 201O.^ This lease amendment is without prejudice to each party's position concerning the manner in which the "cost of improvements" is determined for purposes of future lease extensions �� ��, Dated thia26-'dayof ~/�~~�frf , 2010. � City: Lessee: CITY OF SEWARD GEVVAR[l SHIP'S DFlYOOCK. INC. fr OaZ . -_' ._---_" Phillip Sates Pruitt City Manager elf sevgitgident ATT`.8T: ' uAbrelJhL/cJ ran Lew . ' MC ity Clerk F _.=°*otio" STATE OFALASKA )ss. THIRD JUDICIAL DISTRICT The foregoing instrument was acknowledged before me this:)(P-day of , /uN , 2010 by Phillip Oates, City Manager of the City of Seward an Alaska C0[por8tibn, on behalf of the corporation. \\O"IP////// ,A\O-. OZ($/ ■ 'c 1 A q '/3'S• 0 -:::-2' 4° .Y S---:-.• / 4 1• , ' -, Notary in and for Alas a e-9 / A —2 .1.09,4746ra:or'or Pe 1.,,,t, commission expires: --- 411—cPci r i --) /ilk Eglim*,■ STATE OF ALASKA ) )ss. THIRD JUDICIAL DISTRICT ) The foregoing instrument was acknowledged before me this ,2,rf .day of •itilVet k , 2010 by James Pruitt, President of Seward Ship's Drydock, Inc., an Alaska cafporatfon, on behalf of the corporation. ye/tc4_,141.41,02,qe, i,e..__4 _, otro, N tary in and for Alas a /3 0 y commission expires: _ • ',Nil lin 0 , I ...,1 j how GROUND LEASE AMENDMENT NO. 4 This Ground Lease Amendment No. 4 ("Lease Amendment No. 4~) is between the City of 8avvard. Alaska, an Alaska municipal corporation (^[]ty'), whose address is P.D. Box 167, Seward, Alaska 08604. and Seward Ship's Drydock, Inc., an Alaska corporation ("Lesnee^), whose address is P.O. Box 944, SovvaK1, Alaska 89664. who are lessor and ieooma, respectively, under that certain Ground Lease dated April 25, 1995 of certain real property located within the Seward Marine Industrial Center, Seward, Alaska (the "Leann"). This document amends the Lease as set forth herein. Item 1: Lease Term. Section 2.04 is amended to read as follows, with the intent to allow maximum possible Lease Term extensions to June 30, 2040: Section 2.04 - Extension of Lease Term. Lessee may, at its option, extend the Lease Term for one or more additional periods which shall not, in total, exceed 31 years. Notwithstanding any other provision of this Leaae, no extension of the Lease Term shall cause the Lease Term to expire later than midnight on June 80, 2040. Lessee shall exercise the option granted by this section in the nnonnor, and subject to all of the conditionn, set forth in this section. (a) The exercise of an option to extend the Lease Term under this section shall be subject to the following conditions: ~~~ (1 ) Lessee shall notify Lessor of the exercising of the option in the manner specified in (b) of this section. (2) Before exercising the qotion. Lessee shall submit to City plans for improvements to the Premises or the Ship lift Famj|ity, an engineer's or architect's estimate of the cost of the impnnveman\e, and a schedule for acquiring, constructing and installing the improvements, and City shall have given Lessee its written approval of the proposed improvements. (3) Lessee shall designate the portion of the proposed improvements that it intends to finance with borrowed funda, and shall provide City with a written commitment from a financial institution to lend the designated amount to Lessee. (4) Lessee shall submit to City a written estimate prepared by the financial institution that has committed to lend funds for the improvements of the number of years required to amortize the borrowed umnunt, with interest, in payments totaling not less than $100,000 per year. (5) The exercise of the option shall not extend the expiration date of the Lease Term to a date later than five years after the date the borrowed amount, with |DtergG1, will be amortized under the osUnnntepnuv|dRduOder(a)(4\ oftNSS8ctiOn. (b) Lessee shall give City written notice of the exercise of an option to extend the Lease Term under this section, with the documents required under (a) of this section, not later than 180 days before the date of expiration of the Lease Term, as previously extended. (c) An extension of the Lease Term under this section shall become effective on the date of the closing of the financing of the improvements described in the documents Lessee submits to City to exercise the optIon. Item 2: The parties acknowledge thot, as a result of Ground Lease Amendment No. 3 and the corresponding replat, the Premises are described as: Lots 1-A and 3. Block 7, Fourth of July Creek Subdivisinn, Seward Marine Industrial Center, Seward Ship's Or/dock Replat, according to Plat 2802'22. Seward Recording Distriot, Third Judicial District, State of Alaska. ]Item 3: Other Terms of Lease. All other terms of the Lease remain in effect and legally binding upon the parties except as expressly amended herein. The effective date of Lease Amendment No. 4 shall be when signed by both parties in accordance with Resolution 201 0-QO of the City. City: Lessee: CITY OF SEWARD SEWARD SHIP'S [}RYOOCK. INC. _./Z26 ����, Phillip 0-tes ames T. Pruitt City Manager id AT EST: l .~ anLevVis~ 'MC yC|erk cto 6k,047z. 05. � L STATE OF ALASKA \ )ss. THIRD JUDICIAL DISTRICT \ J The foregoing instrument was acknowledged before me this `| day of ` \8,..) 2010 by Phillip Ootes, City Manager f th City of5awvord an Alaska corporation,'on behalf of the corporation.i — .` . ~' - . __. Notary in a dhorA ioka My commi-sion expires: ^-� \�i--,-),L. \`j STATE�9 ��' �'� �� ) ^anA11p )so. THIRD JUDICIAL DISTRICT \ The foregoing instrument was acknowledged before me thieuV~' dayo| /VO*'j9 2atteFby James Pruitt, President of Seward Ship's Drydock, Inc., an Alaska corporation, on behalf of the corporation. � /~ /Lv -����L���'��~ ( . .��^vv/ Notary in and for Alaska ' My commission expires: L/-/6 (P), :7)- tom ,ter..,.,;.,'.`C.) bl r.r LEASE No: RE-95-094 LESSOR: CITY OF SEWARD LESSEE: SEWARD SHIP'S DRYDOCK, INC. GROUND LEASE AMENDMENT NO. 3 This Lease was originally recorded in Book 89, beginning at Page 248, Seward Recording District,Third Judicial District, State of Alaska. This Lease Amendment No. 3 contains 7 pages, and one Attachment A This cover sheet has been added to this document by: City of Seward, Harbor Department ..mil To provide space for recording data. This cover sheet appears as the first page of the document in the official public record. j Ion sci3 GROUND LEASE AMENDMENT NO. 3 lbw This Ground Lease Amendment No. 3 ("Lease Amendment No. 3") is between the City of Seward, Alaska, an Alaska municipal corporation ("City"), whose address is P.O. Box 167, Seward, Alaska 99664, and Seward Ship's Drydock, Inc., an Alaska business corporation ("Lessee"), whose address is P.O. Box 944, Seward, Alaska 99664, who are lessor and lessee, respectively, under that certain Ground Lease dated April 25, 1995 of certain real property located within the Seward Marine Industrial Center, Seward, Alaska (the"Lease"). City and Lessee are also parties to that certain Maintenance and Operating Agreement dated March of 2000 pertaining to the syncrolift shiplift system located in the Seward Marine Industrial Center adjacent to the leased premises (the "Operating Agreement"). This document amends the Lease as set forth herein. Item 1. Article 1 -Definitions. DELETE the definition of"Operating Agreement," and substitute in its stead, the following new definition: "Operating Agreement" means the Maintenance and Operating Agreement between the City and Lessee dated March 30, 2000, as amended from time to time. Item 2. Parcels 1 and 2 designated on Attachment A hereto ("Parcel 1" and "Parcel 2")are added to the leased Premises, and will require a new plat therefor. The two parcels shall be surveyed and platted in accordance with the ordinances and regulations of the Kenai Peninsula Borough ("Borough") at Lessee's expense with a) Parcel 1 becoming part of a single lot including the existing leased premises and including the portion of Sorrel Road lying within Parcel 1 which portion shall be vacated as an access right-of-way, and b) Parcel 2, including the rails, becoming a second lot. Both parties shall support such platting in proceedings before the Borough. Approval and recording of such a final plat of the parcels within Two Hundred Seventy (270) days following the effective date of this Lease Amendment No. 3 to the mutual satisfaction of the parties is a condition subsequent to the full enforceability of this Lease Amendment No. 3, as provided in Item 8. Item 3. Article 3 - Rent. DELETE Section 3.01 - Amount of Rent and substitute in its stead, the following new"Section 3.01 - Payment of Rent:" Section 3.01-Payment of Rent. Commencing on the effective date of Lease Amendment No. 3 through December 31, 2004, the annual rent for the Premises ("Rent") shall be set at $44,912.00, subject to the results of the survey described in Item 2 of Lease Amendment No. 3. The-portion of Rent for the additional land, approximately 4 acres, added by Lease Amendment No. 3 shall be $16,912.00 per year provided that upon c ompletion of the survey and platting in Item 2 of.Lease Amendment No. 3, the portion of the Rent paid for'the additional land shall be adjusted for the actual square footage and any overpayment will be promptly refunded or any amount due shall be promptly paid. Subject to Section 3.05 - Annual Rent Credits for j Deferred Maintenance, Rent shall be payable quarterly in advance upon the effective date of Lease Amendment No. 3 (prorated for the balance of the current quarter) and thereafter on or before the 1st day of the month beginning each calendar quarter: January 1, April 1, July 1 and October 1. The amount of each quarterly payment shall be one-quarter of the Rent. Item 4. Article 3 - Rent, "Section 3.02 - Payment of Rent." DELETE "Section 3.02(a)" in its entirety. Item 5. Article 3 - Rent. DELETE Section 3.05 - Rent Credits for Deferred Maintenance and substitute in its stead, the following new"Section 3.05- Rent Credits for Deferred Maintenance": Section 3.05 - Rent Credits for Deferred Maintenance. Lessee shall be allowed a credit to be offset against a portion of Rent due on Parcel 1 from the commencement of the Lease Term through December 31, 2004, for the amount actually expended by Lessee through December 31, 2004 for Deferred Maintenance or replacement of shiplift cables. "Deferred Maintenance" shall have the meaning as defined in the Operating Agreement. Lessee shall receive this credit as follows: (a) Lessee may deduct from the portion of each Rent payment due through December 31, 2004 allocable to 5.811 acres of Parcel 1 the amount esJactually expended by Lessee for Deferred Maintenance or replacement of shiplift cables during that period. (b) For the 5.811 acres of the Premises eligible for rent credits only, Rent for the period through December 31, 2004 may be paid in arrears and shall be due and payable and is conditioned upon delivery of the statements as required by Section 3.05 of the Operating Agreement. In no event shall rent credits exceed the Rent allocable to 5.811 acres of Parcel 1. (c) Failure of Lessee to verify the Rent credits annually by submitting the statements per Section 3.05 of the Operating Agreement in a timely manner, and to pay the remainder of any Rent due under the Lease will subject the Lessee to a monthly late charge of $2.50 plus finance charges of 10.5% per annum on that portion of the Rent remaining unpaid, beginning the day after which such statements are due. Ground Lease Amendment No. 3-Page 2 C.\VANDOWSITFMP\SSDLaaseMnendmenl No.3.wpd ^ ' ( /�( ( {� � ~--' ( ��^7 C �~ ( D Item 6. Article 4 - Use of Premises. ADD new "Section 4.07 - Additional Leased ham Land:" Section 4.07 -Additional Leased Land. Lessee shall have possession and quiet e joyment of the additions to the Premises described herein as of the effective date of Lease Amendment No. 3, subject to Section 7.07. Lessee acknowledges that it has inspected the Premises and accepts the same"as- is" and without reliance on any expressed or implied representations or warranties of City, its officers,employees or agents as to the presence of any Hazardous Material, the actual physical condition or characteristics thereof, and the legal description or depiction of the Premises. Lessee has been the operator on the Premises since April 25, 1995 and on a portion of Parcel 1 since 1988. Item 7. Article 4 - Use of Premises. ADD new"Section 4.08 - Public Access." Section 4.08 - Public Access. Lessee shall conduct its operations on the Premises in a manner that will maintain public access to the Shiplift Facility over land owned by the City as required by the U.S. Department of Commerce, Economic Development Administration. Item 8. Article 7-Termination or Expiration of Lease Term. ADD new"Section 7.07 - Failure of Condition Subsequent:" L.. QecUon7.07- Failure of{�ondiboO��Wbaequent. |f the oondidonsubsequent d and in the manner as set forth therein, the Lease shall be terminated immediately as to the additional land described therein. Lessee shall pay all Rent that would have been due for the additional land for the period of Lessee's possession. The Lease, as amended, shall remain in effect as to the Prennimea, as defined without the additional land added in Lease Amendment No. 3, notwithstanding the failure of the condition subsequent described herein and the definitions of Premises shall be revised accordingly. Items 5, 6, 7, S. and 10 shall survive termination. Item 9. Article 12 - Dispute Resolution. DELETE Section 12.01 - Submission of Claims in its entirety and substitute in its otaad, the following new "Section 12.01 - Submission of Claims:" Section 12.01 - Submission of Claims. All Claims by a party shall be submitted to the other party by written notice. The responsibility to substantiate a Claim shall rest with the party making the Claim. A Claim by either party must be made within 80 days of Ground Lease Amendment No. 3 -Page 3 c.w*wooW"ncmM,nLoa.se^mond°."/No.,wm ' - U l � \� ( � ` /~)^/k' the event giving rise to the C|ahn, or the date the claimant first recognizes � the condition giving rise to the Claim, whichever occurs later. If a Claim is --� not resolved within 60 days of its submission under this section,the claimant may submit the Claim to Arbitration under Section 12.02 and pursuant to the Alaska Uniform Arbitration AcL, AS 08.43.010 et seq. Unless the parties agree otherwise in writing, a Claim is waived if not submitted to Arbitration under Section 12.02 within 80 days of the giving of the initial written notice of the Claim under this section. Item 10. Article 14 Miscellaneous. ADD the following new'Section 14.14 - Claims": Section 14.14 - Claims. Lessee assumes all [eaponnibi|itv, risk and liability for any claim relating to the validity or enforceability of Amendment No. 3. Lessee shall bring no action and seek no damages or recovery as a result of a determination that Lease Amendment No 3 is invalid or unenforceable, in whole or in part, for any reason. Lessee agrees to defend and release the City, its ofOcia|s, officenu, ennp|oyeea, agents and contractors from any and all liability for loss or damages resulting from a decision that Lease Amendment No. 3 is invalid or unenforceable,whether in whole or in part,for any reason. Lessee shall accept the City's tender of a claim by a third party against the City that Lease Amendment No. 3 is invalid or unenforceable, and upon the City's tender shall defend against the claim at Lessee's expense. Lessee shall not seek or recover damages from the City for any loss or damages arising from such event. Lessee shall control the defense of the claim but shall not settle the claim without the City's prior written nonaent, which shall not unreasonably withheld. The City shall cooperate in the defense of the claim. In the event Lease Amendment No. 3 is declared invalid or unenforceable by a court of competent jurisdiction, a) Lessee shall discharge any judgment in favor of the third party against Lessee or the City, including costs and attorney's fees incurred in the litigation, but any other attorneys's fees and costs shall be paid by the party who incurred thenn, b) any improvements to the land which was added to the Premises by Lease Amendment No. 3 shall be subject to disposition in accordance with Section 7.03 of the Lease and c) if a replat has been recorded in accordance with Item 1 of Amendment No. 3, the Premises shall be replatted to its configuration as it existed prior to Lease Amendment No. 3, at Lessee's sole expense. This Section 14.14 is severable and shall survive termination of this Lease and Lease Amendment No. 3. Item 11. Exhibit B. DELETE Exhibit B and substitute in its stead a portion of the new plat to be prepared in accordance with Item 2 of Lease Amendment No. 3. Item 12. Other Terms of Lease. All terms of the Lease remain in effect and legally binding upon the parties except as expressly amended herein. Ground Lease Amendment No. 3-Page 4 c.,*/woownocmpm`nL",^"^~°"om^*w" ^°'^ The effective date of Lease Amendment No. 3 shall be when signed by both parties hum in accordance with Resolution 2001-115 of the City. The parties agree to execute and record a revised memorandum of lease reflecting the Lease terms as amended. City: Lessee: CITY OF SEWARD SEWARD SHIP'S DRYDOCK, INC. i'7/ /O/ ROT W. Scott Jankz -mes T. Pruitt City Manager President ATTEST: /c6,%( Patrick Reilly City Clerk tvis ti 1 8 34Zsg ot 4:4 . ...... c`; .•%C.) r: SEAL LI I 4 %pc, v • 4 ce■I'l lir 44 , ex,••..<1.. g4,4 4 F 644831,10A° /--) O'C CCD—46LCDC CD 0 Cb)( 0 Ground Lease Amendment No. 3- Page 5 C1WINDOWSLTEMPISSDLoasoArn ondment No.3.wpd 1 oq • ACKNOWLEDGMENTS j STATE OF ALASKA ) ss. THIRD JUDICIAL DISTRICT ) THIS CERTIFIES that on this ?.(e day of (.11)6(f--- , 2001, before me, a Notary Public in and for the State of Alaska, personally appeared W. Scott Janke, known to me and to me known to be the City Manager for the City of Seward, Alaska, and authorized to execute documents on its behalf, and is the individual named in and who executed the foregoing document on behalf of the City of Seward for the uses and purposes therein set forth. , IN WITNESS WHEREOF`,,l her&untb set my hand an• seal. t.. ota r ' '"lic in and for Alas My Co ission Expires: STATE OF ALASKA ) ' ) ss. THIRD JUDICIAL DISTRICT ) THIS CERTIFIES that on this Ae,`— day of 1bc-�- , 2001, before me, a Notary Public in and for Alaska, personally appeared James Pruitt, to me known to be the person who executed the foregoing instrument on behalf of Seward Ship's Drydock, Inc. He acknowledged to me that she/he executed the same freely and voluntarily on behalf of said corporation. He stated to me under oath that he is the president of the said corporation, has been authorized by the Board of Directors of the corporation to execute the instrument on its behalf, and has full power and authority to execute the same. IN WITNESS WHEREOF, I hereunto set my hand and seal. \\-Q44pLsK,Ro ti ,u Ufa. x : * WAR "itk .�,_ No ary Public in and for laska * My Commission Expires: i0//C,//605 000145 . ct) 2802 JAN 31 AI1: ILI SEA'/ARD REOUESTED BY RECORDING DISTRICT \ i Ground Lease Amendment No. 3-Page 6 C WONDOWTATEMMSDLeaseAmendment No 3 wpd CITY OF SEWARD, ALASKA RESOLUTION 2000-010 AYES: Blatchford, Brossow,King, Shafer NOES: Calhoon ABSENT: Clark, Orr ABSTAIN: None ATTEST: Patrick Reilly City Clerk �� F S , ,,, G :GOB Rq'j.• c d t SEAL i E n. • • 1 • �•"V 1 SC)1 e • c0.C: u 09 LEASE 5— 4 AMENDMENT NO. 1 ••� S 9 THE CITY OF SEWARD,ALASKA, a home rule municipal corporation, organized and existing under the laws of the state of Alaska, hereinafter referred to as "CITY", and SEWARD SHIP'S DRYDOCK,INC.,P.O.Box 944, Seward, Alaska 99664-0944, hereinafter referred to as "LESSEE," hereby agree that the Lease between them for Lot 1 Block 7, Fourth of July Creek Subdivision Seward Marine Industrial Center, and originally approved by City of Seward Resolution 95-001 is hereby amended as follows: Delete ARTICLE I. --LEASED LAND, in its entirety and substitute in its stead: ARTICLE I.—LEASED LAND. The Leased Land is located in the City of Seward, Alaska. The Leased Land is described as follows: Lot 1 Block 7, Fourth of July Creek Subdivision, Seward Marine Industrial Center, Kenai Peninsula Borough Preliminary Plat No. 97-108, recorded as Plat No.9 7-Z7 in the Seward Recording District, Third Judicial District, State of Alaska. The total leased area is 5.811 acres more or less. In all other respects the lease as previously amended is to remain unchanged and in full force between the undersigned. IN WITNESS WHEREOF, the parties hereto have executed this document, .and it is effective this ,..,2asd day of htea e.-1 , 1997. LESSOR: LESSEE: CITY OF SEWARD, ALASKA SEWARD SHIP'S DRYDOCK, INC. ‘4,4'„411 By: /i e . (-)[�(=Frr rt By: James T. Pruitt N...6 City Manager Its: President ATTEST: -4..7 k Patrick Reilly.'City C1e�. tit• "J. l.ease 95.p94 Amendment Igo. 1 1 LEASE AMENDMENT NUMBER 2 (RE-95-094) THE CITY OF SEWARD,ALASKA,a home rule munici al corporation,organized and existing under the laws of the State of Alaska, hereinafter referred to as "City," whose mailing address is9. O. Box l87, Seward, Alaska 99664, and 8EWARD SHIP'S DRY00CK, lNC., hereinafter referred to as"Lessee,"whose mailing address is P.0.Box 944,Seward,Alaska 99664, for and in consideration of the mutual promises and covenants hereinafter contained, hereby agree that the lease dated April 25, 1995 between them for the real property described in attached Exhibit A. hereby incorporated by reference (the "Lease"), is hereby amended as follows: DELETE Section 3.05 within Article 3. RENT and substitute, in its stead, the following: Section 3.05 ' Rent Credits For Deferred Maintenance. Lessee shall be allowed as a credit not exceeding the amount of Rent due from the commencement of the Lease Term through December 31, 2004, for the amount actually expended by Lessee through December 31, 2004 for Deferred Maintenance or replacement of shiplift cables. Lessee shall receive this credit as follows: (a) Lessee may deduct from any Rent payment due during the period ending December 31' 2004, the amount by which (i) the amount actually expended by Lessee for Deferred Maintenance or replacement of shiplift cables, exceeds (ii) Rent for which Lessee already has received a credit under this section. (b) At the end of each Fiscal Year ending before January 1, 2005, City shall refund to Lessee from Rent due and paid on or before the end of each such Fiscal Year, an amount by which ~~~ (i) the amount actually expended before the end of such Fiscal Year by Lessee for Deferred Maintenance or replacement of shiplift cables, exceeds (ii) Rent for which Lessee already has received a credit under this section. In all other respects, the Lease is to remain unchanged and in full force between the undersigned parties. IN'WITNESS WHEREOF,the parties have executed this document and it is effective this —day of January, 2000. CITY: LESSEE: THE CITY OF SEWARD SEWARD SHIP'S DRYDOCK, INC. By: W. Scott Janke By: James T. Pruitt Seward Ground Lease Amendment J tOoca3374170tSSDLe..eA=nd"°*1.3 Page 1 ' OOK.B `PAGE as ' ,• ,, ,. , ;:{•4 D71\ 10 1574. FRICT STATE OF ALASKA ) effi )ss. THIRD JUDICIAL DISTRICT ) roc( �'� THIS IS TO CERTIFY that on this ,X.-1 day of ,1 6C6.1 i he/i 199/before me, the undersigned`, a Notary Public in and for the State of Alaska, personally appeared ,_ i (1%)111), 1.-. t',/1 cu±C known to me and to me known to be the individual named in acrid who executed the foregoing document,and acknowledged to me that he signed and sealed the same of his voluntary act and deed for the uses and purposes therein mentioned. (0...\,E.. ,S,, WITNESS my hand and notarial seal the day and year first hereinabove written. l�laEIE_i`'1 Notary Public in and for Alaska �� s. /�t' My Commission Expires: //1l', //, '� ()0/• ---S- TE OF ALASKA ) )ss. THIRD JUDICIAL DISTRICT ) THIS IS TO CERTIFY that on this 2---34'19 day of Ze/m.l -y-- , 1992 before me, the undersigned, a Notary Public in and for the State of Alaska, personally appeared i k:C::-- L. o rC' known to me and to me known to be the individual siiii named in and who executed the foregoing document, and acknowledged to me that he signed and sealed the same of his voluntary act and deed for the uses and purposes therein mentioned. WITNESS my hand and notarial seal the day and year first hereinabove written. 7 lit ' Vit6 , Stare of ANA u No ary Public in and for Alaska 7�� ���`it .21512V.titc66In".nn.'il' •gw" .//, '-2/-- .- //0'./(S-7\-- YVE l ti:G.WELSH ' {,;.\}« ,•„�,,,� .r N Commission Expires: RETURN TO: Community Development Dept. CITY OF SEWARD RECORDED_rt?E Aer P.O. BOx 167 Sew'ard1 Recording Distric Ci: - Seward, AK 99664 Date.~...1 ( + __, 16ES .. Time: f D_ •,.c C`,,,..M,,,..M Requested by Gi :_(--,Cs 7Q.e.CX c, Lease 95-094 Amendment No. 1 2 j .2))7 / ' LEASE MEMORANDUM (WITH RENTAL AMOUNT OMITTED FOR RECORDING) NOTICE IS HEREBY GIVEN that a lease between the CITY OF SEVV4RD, ALASKA, PO Box 167. Seward, Alaska 99664, a home rule municipal corporation located within the Kenai Peninsula Borough, State of Alaska, herein called "LESSOR," and SEWARD SHIP'S DRYDOCK, INC. . PO Box 944. Seward. Alaska 89664. herein called LESSEE, was made regarding the following described real property: Commencing at the northeast corner of United States Survey No, 4827 from a 5/8 x 8O" rebar with an aluminum cap located, thence along the easterly line of said USS 4827. South 00°34'13" East 1,458.02 feet; thence leaving said easterly line at a right angle thereo. South 89°25'50"West 850.80 feet to the TRUE POINT OF BEGINNING; thence South 8S"25'5V"West 425.O0feet; thence South 00^34'13^ East 605.00 feet; thence North 88"25'5O^ East 425.00feet; thence North O0^34'13^West 6U5DV feet\u the TRUE POINT OF BEG1NN|NG, containing an area of 257,125 square feet more or less. Said property is located at 3306 Sorrel Road within the Seward Maine Industrial Center, at Fourth of July Creek and is also described as Lot 1. Block�� 5eworgMarine Industrial Center, Fourth of July Creek Subdivision (preliminary p|at), all within the Seward Recording District, Third Judicial District, State of Alaska. The effective lease term is April 25, 1995 through June 30, 2009 LESSEE shall have the right to extend the lease term for one or more additional periods that shall not, in total, exceed 20 years or cause the lease term to expire later than midnight on June 30, 2029. The original lease is on file and available for public review in the Harbormaster's Office, 1300 Fourth Avenue, PO Box 187, Seward, Alaska 99664. IN WITNESS WHEREOF, the parties hereto have respectively signed this memorandum on the dates below written. LESSOR: LESSEE CITY OF SEWARD, ALASKA SEWARD SHIP'S DRYDOCK, INC. 4,d"w�K �r+/ � �����^ 1Y-- '� ' . ` . City Manager JbmooT. Pruitt, President / / Date: /a 63 I', 7 Date: /Q/ "� / 7 _ ATTEST: SUBMITTED BY: Foster M. Singleton, Mu¢uor• aster -- . . , (CitY eal) , ^ ' p�° ` MEMoRANDuM OF LEASE � Seward Ship's Drydock, Inc. � - x ' BOOK l_ iPAGE' 4-01 STATE OF ALASKA ) ss. THIRD JUDICIAL DISTRICT ) THIS IS TO CERTIFY that on this 1 day of 1997 beforp me, the undersigned, a Notary Public in h State aUy appeared 'Z.. L ~.--e�.(cl. kn own to me and to of Seward, Alaska, and authorized to execute documents on its behalf, and is the individual named in and who executed the foregoing document on behalf of the City of Seward for the uses and purposes therein set forth. WITNESS my hand and notarial seal the day and year first hereinabove written. \'^ `�(/ _^ . Si.1 rmnc���* No Public in and for Alaska *m^x`'n/ouc Commission Expires: 7 �� STATE OF ALASKA ) ss. THIRD JUDICIAL DISTRICT ) )' THIS |ST0CER�FYth� on ��.��/��uyu/ 8/�/ . . 1ooj before me, the undersigned, a Notary Public in and for the State of Alaska, personally appeared James T. Prudt, known to me and to me known to be the president of SEWARD SHIP'S DRYDOCK, INC., and acknowledged to me that the foregoing instrument was executed by him in his official capaody, pursuant to the authorization set forth in the by-laws of said corporation, and that the same was executed as the free and voluntary act and deed of the corporation for the uses and purposes therein set forth. mid WITNESS my hand and notarial seal the day and year first hereinabove written. (�/�1/(�//`.�'� _ Notary Public in and for A| My Commission Expires:/1/11/. /// c/00/ Return to: Harbormaster CITY OF SEWARD PO Box 1O7 Seward, AK 99664 / NOTARY PI o cr cn- [l/~ 8�C D ���>— - Seviai.d Diszrict. ` u—�— Daze � MEMORANDUM OF LEASE Page Seward Ship's Diydock, Inc. ciy � 'a �- F ii '�.� x aF 1 im T Y{ . . i II jF I s'. ,. I 3F v � X 4 . +ova' so it .' mental Site Phase I Environ Ass m Project ess Solstice Seward Ships Drydoent ck 7 Mile Nash Road Seward,Alaska Prepared for: Vigor Industrial, LLC April 2014 www.erm.com \ ‘‘,,,—...„0„,‘err ' : The world's leading sustainability consultancy ET?M 1 j Vigor Industrial,LLC Phase I Environmental Site Assessment Project Solstice Seward Ships Drydock 7-Mile Nash Road Seward, Alaska April 2014 Project Number: 0230020 Erik Ipsen,PE Partner-in-Charge edk„„try‘llt- Bob Carson Project Geologist Lisa Nicholson Project Manager ERM-West, Inc. 1001 SW 5th Avenue, Suite 1010 Portland,Oregon 97204 T: (503)488-5282 F: (503) 488-5142 TABLE OF CONTENTS LIST OF FIGURES III EXECUTIVE SUMMARY 1 1.0 INTRODUCTION AND BACKGROUND 1 1.1 PURPOSE AND AUDITORS 1 1.2 SCOPE OF WORK 1 1.3 LIMITING AND SPECIAL CONDITIONS 2 1.3.1 Limiting Conditions during the Site Visit 2 1.3.2 Significant Assumptions 2 2.0 SITE SETTING 3 2.1 LOCATION 3 2.2 NEIGHBORING PROPERTIES 3 2.3 TOPOGRAPHY AND HYDROLOGY 4 2.4 GEOLOGY AND HYDROGEOLOGY 4 3.0 SITE AND OPERATIONS INFORMATION 6 3.1 GENERAL SITE DESCRIPTION 6 3.2 UTILITIES 6 3.3 PROCESSES AND MATERIAL USE 7 3.3.1 Current Operations 7 3.3.2 Discontinued Operations 7 3.4 CHEMICAL USE AND STORAGE 7 3.4.1 Underground Storage Tanks (USTs) 7 3.4.2 Aboveground Tanks (ASTs) 7 3.5 HAZARDOUS AND NON-HAZARDOUS WASTE MANAGEMENT 8 3.5.1 Hazardous Waste 8 3.5.2 Non-Hazardous Waste 8 3.6 WATER, WASTEWATER,AND STORM WATER 8 3.6.1 Water 8 3.6.2 Wastewater 9 3.6.3 Storm Water 10 3.7 AIR EMISSIONS 10 3.8 POLYCHLORINATED BIPHENYLS (PCBS) 10 3.9 VISUAL INDICATIONS OF ON-SITE IMPACTS 11 3.10 ASBESTOS-CONTAINING MATERIALS (ACMS) 11 i 4.0 ASSESSMENT OF PAST LAND USE AND OPERATIONS 12 4.1 GENERAL INFORMATION 12 4.2 HISTORICAL ENVIRONMENTAL REPORTS 12 4.3 EVALUATION OF HISTORICAL INFORMATION SOURCES 15 4.3.1 Subject Property 16 4.3.2 Adjacent Properties and Surrounding Area 16 5.0 DATABASE AND GOVERNMENT RECORDS REVIEW 18 5.1 GOVERNMENT RECORDS REVIEW/INTERVIEWS 18 5.2 ENVIRONMENTAL DATABASE SEARCH 18 5.2.1 Subject Property 19 5.2.2 Surrounding Properties 19 6.0 DATA GAPS 21 7.0 USER AND OWNER PROVIDED INFORMATION 22 7.1 USER AND OWNER/OPERATOR QUESTIONNAIRES 22 7.2 TITLE RECORDS 22 7.3 ENVIRONMENTAL LIENS OR ACTIVITY AND USE LIMITATIONS 22 7.4 SPECIALIZED KNOWLEDGE 23 7.5 COMMONLY KNOWN OR REASONABLY ASCERTAINABLE .. INFORMATION 23 7.6 VALUATION REDUCTION FOR ENVIRONMENTAL ISSUES 23 7.7 OWNER, PROPERTY MANAGER,AND OCCUPANT INFORMATION23 7.8 REASON FOR PERFORMING PHASE I 23 7.9 NON-REGULATORY INTERVIEWS 24 8.0 CONCL USIONS/RECOMMENDATIONS 25 9.0 QUALIFICATIONS OF ENVIRONMENTAL PROFESSIONALS CONDUCTING THIS ASSESSMENT 27 10.0 LIMITATIONS 28 APPENDIX A — SITE PHOTOGRAPHS APPENDIX B — AERIAL PHOTOGRAPHS, TOPOGRAPHIC MAPS, CITY DIRECTORIES SEARCH RESULTS,AND SANBORN FIRE INSURANCE MAPS APPENDIX C — SITE-AND USER-PROVIDED INFORMATION APPENDIX D — USER AND OWNER QUESTIONNAIRES APPENDIX E — EDR DATABASE SEARCH RESULTS APPENDIX F — PROFESSIONAL PROFILE ii LIST OF FIGURES 1 Site Location Map follozving text 2 Site Layout Map 3 Surrounding Area Map LIST OF TABLES 1 Summary of Historical Records Reviewed page 15 2 Chronology of Subject Property Uses page 16 3 Chronology of Surrounding Area Uses page 16 4 Summary of Findings from EDR Report page 19 5 Data Gap Summary page 20 6. iii EXECUTIVE SUMMARY ERM-West, Inc. (ERM) performed a Phase I Environmental Site Assessment(ESA) of the Seward Ships Drydock (SSD) operations located at 7-Mile Nash Road, Seward, Alaska (the "subject property" or "site"). The Phase I ESA was conducted in accordance with the scope and limitations of American Society for Testing and Materials (ASTM) Standard E 1527-O5[Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process, and the standards for conducting all appropriate inquiries set forth by the United States Environmental Protection Agency at Title 40 of the Code of Federal Regulations, Part 312. ERM performed this ESA at the request of Vigor Industrial LLC using a materiality threshold of$250,000 per environmental issue identified. Noteworthy issues of<$250,000 will also be identified. The site visit was performed on 19 December 2013 by ERM assessors Ms. Lisa Nicholson, C.P.G. and Ms. Kelsey Coolidge. ERM was accompanied on the site visit by Jim Pruitt, the owner of SSD. SSD operates at the Seward Marine Industrial Center (SMIC) and is under an operation agreement with the owner, the City of Seward. SSD operates on an 11- acre (479,160 square feet) area and leases a 7.84-acre parcel of land identified as Lot 1 Block 7 of the SMIC. Recognized Environmental Conditions A Recognized Environmental Condition(REC), as defined in ASTM Standard E 1527-05, is "the presence or likely presence of any hazardous substances or petroleum products on a property under conditions that indicate an existing release, a past release, or a material threat of a release of hazardous substances or petroleum products into structures on the property or into the ground, ground water, or surface water of the property, excluding de minimis conditions." Based on the data obtained during the site visit, the environmental database review, and interviews with persons familiar with the site and its history, the following RECs were identified at the site: • Vessel washwater and site storm water are discharged to the Transfer Pit and French drain. The quality of discharges is evaluated visually as part of the requirements of the facility stormwater permit. The permit only requires SSD to visually inspect the water in the Transfer Pit for evidence of an oily sheen. Washwater and storm water comes ERM ES-1 SOLSTICE/0230020/APRIL 2014 into contact with areas of metals and chemical use and storage throughout the site, including fabrication, raw material storage, painting activities, non-hazardous waste storage, and used grit storage areas. Therefore, it is possible that organics and metals (including copper, zinc, lead, and chromium) and possibly tributyltin, from current or former SSD operations, may become entrained in storm water and be discharged to the subsurface. Organics and metals in surface water and/or sediment could pose a risk to ecological marine receptors. • Although wastewater is discharged to the unpaved ground surface and to a French drain, groundwater conditions were not evaluated by the United States Environmental Protection Agency (USEPA), SSD, or Alaska Department of Environmental Conservation(ADEC) as part of site investigations conducted between 2007 and 2010. The investigations only addressed the condition of shallow soil and/or intertidal sediment. In 2013, ADEC issued a "No Further Action" letter for conditions associated with shallow soil and sediment contamination identified at the site. Material Compliance Issues • ADEC and the City of Seward require SSD to comply with Best Management Practices for their site activities. In 2012, the City indicated that SSD is technically in default of the Lease as a result of four unresolved Notices of Default issued by ADEC. The City administration recommended allowing the Lease to continue, without waiving any rights of the City, with the understanding and expectation that environmental compliance matters will be dealt with and resolved between SSD and DEC. Based on a 2008 ADEC fact sheet, the facility was issued a Notice of Violation to SSD in February 2007 for failing to follow the dust control plan they committed to in spring 2006. City of Seward records indicate the facility continued to receive complaints about dust control issue and received another NOV in April 2013. No information regarding the specific NOV issues or resolution was provided by ADEC or SSD. SSD has also not prepared BMPs for wastewater discharges, stormwater discharges, registered the French drain as a UIC device, or prepared a site specific Spill Prevention Control and Countermeasure (SPCC) Plan. ERN1 ES-2 SOLSTICE/023(X)2(1/APRIL 2014 De Minimis or Other Potential Issues While not RECs, ERM identified concerns that are summarized below and are discussed in greater detail in the body of the report: • The quality of the sediment in the boat basin has not been evaluated. A recent 10 million dollar grant to the City of Seward,for in-water and upland improvements to SMIC, includes funds for the dredging of 5 to 10 feet of material from the boat basin. SSD indicated it has not conducted any repair activities on or over water. • SSD reportedly disposed of approximately 189 cubic yards of spent sandblast grit on a private offsite property in 2004. As the result of public complaints, ADEC investigated the disposal activities and required SSD to excavate the material for disposal in a licensed landfill by 2005. j ERNI ES-3 SOLSTICE/0230020/APRIL 2014 1.0 INTRODUCTION AND BACKGROUND ir.. 1.1 PURPOSE AND AUDITORS ERM-West, Inc. (ERM) performed a Phase I Environmental Site Assessment(ESA) of the of the Seward Ships Drydock (SSD) operations located at 7-Mile Nash Road,Seward Marine Industrial Complex Seward, Alaska (the "subject property" or "site"). ERM performed the ESA at the request of Vigor Industrial LLC (the"User") using a materiality threshold of$250,000 per environmental issue identified. Noteworthy issues of <$250,000 will also be identified. The site visit was performed on 19 December 2013 by ERM assessors Ms. Lisa Nicholson, C.P.G and Ms. Kelsey Coolidge. ERM was accompanied on the site visit by Mr.Jim Pruitt, the owner of SSD, and the operator of the subject property. 1.2 SCOPE OF WORK This environmental assessment was conducted in conformance with ERM's proposal dated 17 December 2013 and with the requirements of ikon American Society for Testing and Materials (ASTM) Standard E 1527-05. Standard Practice for Environmental Site Assessments:Phase I Environmental Site Assessment Process and the standards for conducting all appropriate inquiries (AAI) set forth by the United States Environmental Protection Agency (USEPA) at Title 40 of the Code of Federal Regulations (CFR) Part 312. The assessment was conducted to evaluate and identify conditions indicative of releases and threatened releases of hazardous substances and petroleum products on, at, in, or to the subject property. ERM's Phase I ESA sought to gather information regarding: (1) current and past property users and occupancies; (2) current and past users of hazardous substances and petroleum products; (3) waste management and disposal activities that could have caused a release or threatened release of hazardous substances; (4) current and past corrective actions and response activities to address past and ongoing releases of hazardous substances at the subject property; (5) engineering controls at the subject property; (6) institutional controls at the subject property; and (7) properties adjoining or located near the subject property that have environmental conditions that could have resulted in conditions indicative of releases or threatened releases of hazardous substances to the subject property. ERM 1 SOISTICE/023(X120/APRI1 2(114 ERM's Phase I ESA included: • An on-site inspection of the subject property to evaluate current conditions and identify areas of potential concern; • A review of property history through interviews and aerial photographs,city directories, ownership records, and historical mapping; • Observation of adjacent properties and the local area to evaluate the potential for adverse environmental impact to the subject property; • Interviews/research of local city/county, tribal, state, and federal records, including contracting of Environmental Data Resources, Inc. (EDR) to identify sites of concern as required in the regulatory records review section of the ASTM standards for a Phase I ESA, where available; and • Interviews with the prospective purchaser. Photographs of the site were taken to document current conditions and are included in Appendix A. Copies of aerial photographs, topographic maps, City Directory Search results, and Sanborn Fire Insurance Maps are presented in Appendix B. Property environmental records or permits, reasonably obtainable at the time of the site visit, were reviewed and are included in Appendix C, as appropriate. Copies of the questionnaires (submitted to the User and Owner/Operator) are presented in Appendix D. The EDR Database Search results were obtained and are presented in Appendix E. 1.3 LIMITING AND SPECIAL CONDITIONS 1.3.1 Limiting Conditions during tile Site Visit During the site visit, the ground was covered by approximately a foot of snow. As a result, ERM was unable to inspect the ground conditions (e.g., staining) due to the snow coverage. In addition, it was not possible to determine surface completions (i.e., pervious or impervious) at all locations. 1.3.2 Significant Assumptions No significant assumptions have been made. ERNI 2 SOLSTICE/0230020/APRIL 2014 2.0 SITE SETTING 2.1 LOCATION The SSD operations are conducted on Block 7 of the Seward Marine Industrial Center (SMIC) located at Mile 7 Nash Road, Seward, Alaska. The total operations area includes an approximately 11-acre parcel on the SMIC uplands. SSD leases lots 1A and 3 of Block 7. SSD has operations outside these lease areas, including the transfer The general location of the property and the physiographic features of the surrounding area are shown on Figure 1, developed from the United States Geological Survey 7.5-minute quadrangle for Seward, Alaska, dated 1995. Figure 2 provides a site layout, including leasehold boundaries. 2.2 NEIGHBORING PROPERTIES The subject property leasehold is located in a marine industrial area across Resurrection Bay from the Seward, Alaska townsite. The abutting properties and nearby land use includes: ir.. • North: City of Seward Washdown Pad (Block 7, Lot 4); • East: The eastern portion of Block 7, Lot 4 is used for storing derelict boats. The city moves the boats to this location when they have been abandoned in the boat storage area. Block 6 is immediately east of Block 7 and only Lot 1 is currently leased by Global Towers for placement of a cell tower; • South:The southern portion of Block 7, Lot 4 is part of the active boatyard and two boats were parked there at the time of the site visit. Block 8, south of Block 7 is un-leased,undeveloped land in the alluvial fan of Fourth of July Creek; and • West: A boat basin and dock with a 250-ton Marine SynchroLift for pulling vessels out of the water. Based on ERM's observations, the closest residences are located approximately one mile north of the subject property on Nash Road. No visual evidence of environmental concerns was observed on immediately surrounding properties. However, as noted above, the ground surface was covered with snow during the visit and could not be inspected. ERNI 3 SOLSTICE/0230020/APRIL 2014 8 2.3 TOPOGRAPHY AND HYDROLOGY j The subject property is located in Seward Alaska,which lies in the south- central portion of Alaska on the Kenai Peninsula region. Seward is located at the north end of Resurrection Bay. The subject property is part of the SMIC,which was constructed on the northern portion of the Fourth of July Creek alluvial fan with quarried and/or dredged material from Resurrection Bay. The SMIC is located at the mouth of Fourth of July creek across Resurrection Bay from the main Seward townsite. The property is located at an elevation of approximately 15 feet above mean sea level, and is generally flat around the buildings and parking areas. The overall topographic trend of the surrounding area is to the southwest towards Resurrection Bay. Mountains surrounding the site reach elevations of 2,000 feet within one mile of the coast. The closest surface water features to the subject property are Carlanna Creek, immediately northwest of the subject property, and Fourth of July Creek located south of the subject property. The region is a temperate rainforest with approximately 68 inches of precipitation per year. According to the EDR report(Appendix E), the subject property is not identified within the 100 or 500-year floodplains. The EDR report does show the subject property is identified on the national wetlands inventory map as containing potential wetland areas. 2.4 GEOLOGY AND HYDROGEOLOGY The area surrounding Resurrection Bay was covered by glaciers during the Pleistocene Epoch. Numerous glaciers are still present east of Resurrection Bay and the Harding Icefield lies a few miles west of the main Seward townsite. Exposed bedrock is comprised of alternating units of greywacke and phyllite which have experienced low-grade metamorphism. Local surficial deposits are comprised of alluvial-fan and fan-delta deposits and include drift, mudflows, and landslide deposits near the mouths of smaller tributaries including Fourth of July Creek. Geologic maps and site data indicate the subject property is underlain by fill, fan-delta deposits, and slightly metamorphosed sedimentary bedrock. The steep underwater face of the alluvial fan at Fourth of July Creek reportedly suffered submarine landslides during the 1964 earthquake. ERNI 4 SOLSTICE/0230020/APRIL 2014 Resurrection Bay is a deep fjord about 25 miles long and 3 to 5 miles wide, with a maximum depth of 978 feet. According to the SMIC website, the area around the SMIC dock is dredged to a depth of-21 to -25 feet mean lower low water. The City of Seward is proposing to deepen portions of the boat basin to a depth of-30 feet along with other improvements. Shallow groundwater flow would be expected to come from the mountains to the northeast and move southwest towards Resurrection Bay. It is important to note that groundwater flow direction can be influenced locally and regionally by the presence of tidal action, surface topography,recharge and discharge areas, horizontal and vertical inconsistencies in the types and location of subsurface soils, and proximity to water pumping wells. Confirmation of specific geologic and hydrogeologic factors affecting groundwater flow beneath the subject property is beyond the scope of this ESA. Based on information from the City of Seward, a water supply well serves the SMIC located approximately one mile north of the subject property. Ism ERNI 5 SOLSTICE/0231X120/APRIL 2014 3.0 SITE AND OPERATIONS INFORMATION 3.1 GENERAL SITE DESCRIPTION According to the Kenai Peninsula Borough Tax Assessor records, the subject property contains 7.34 acres of land and consists of Parcel Number: 14534046. The property is currently owned by the City of Seward. A facility layout diagram is included as Figure 2. The property includes: • Two uncovered work bays and one covered work bay (Lot 1A), connected by a rail system to the 250-ton SyncroLift; • Uplands repair berth (Lot 3) with a rail and key system that allows ships to be moved from the Travelift to the shipbuilding zone; • The Fabrication Building that is an approximately eight-story high, three-sided building for vessel construction and repair, that also contains an office space; • Metal storage/lay-down areas; • Gravel parking lot; J • Oil/water separator with containment; • Hazardous materials storage building; • A non-hazardous waste storage area (uncovered); and • Office trailers The site is fenced but access is not restricted. 3.2 UTILITIES SSD is provided with the following utilities: • Water from the City of Seward from a well and water tank located approximately one mile north of the subject property; • Sewer from City of Seward (a sewage lagoon is located approximately one-half mile northeast of the subject property); and • Electricity from the City of Seward. There is no natural gas utility in Seward. ERM11 6 SOLSTICE/0230020/APRIL 2014 3.3 PROCESSES AND MATERIAL USE 3.3.1 Current Operations At the time of ERM's site visit, the subject property was owned by the City of Seward and was leased by SSD. Current site operations include ship repair and fabrication. A facility layout diagram is included in Figure 2. 3.3.2 Discontinued Operations Based on information obtained from Mr. Pruitt and other information sources, the Seward Ship's, originally Seward Ship's Chandlery was operated from the Leirer Industrial Park in the main Seward townsite. Seward Ship's Chandlery still uses this site. In 1979,Seward Ship's leased an additional site at Lowell Point on the west side of Resurrection Bay where they began drydocking and servicing vessels. In 1985, after completion of the SMIC, the company started operations as Seward Ship's Drydock in its current location. Prior to the completion of the SMIC and the subject properties operation as a drydocking facility, the area was part of Resurrection Bay. 3.4 CHEMICAL USE AND STORAGE lbw A list the types and volumes of chemicals stored and used at the site was requested,but was not provided by SSD. Based on site observations it appears that the primary items at the site include sandblast grit, paint, solvents, and oil products. 3.4.1 Underground Storage Tanks (USTs) No USTs are present on the parcel. 3.4.2 Aboveground Tanks (ASTs) ASTs that are currently in use at SSD include: • A 2,000-gallon,horizontal, double-walled, diesel tank; • A 3,000-gallon,horizontal, double-walled gasoline tank; • Two 300-gallon,horizontal tanks located in the vehicle maintenance shop and in the fabrication shop that store used oil; • An approximately 300-gallon, diesel storage tank for heating the breakroom; ERb1 7 SOLS[ICE/0230020/APRIL 2014 • A 200-gallon diesel day tank behind a storage shed adjacent to the southern uncovered work bay; and • Numerous empty storage tanks scattered across the site. 3.5 HAZARDOUS AND NON-HAZARDOUS WASTE MANAGEMENT 3.5.1 Hazardous Waste SSD is not listed as a hazardous waste generator in the EDR report or in the USEPA Envirofacts website. However, the facility does generate paint waste. Details of waste paint management activities were requested from SSD but were not provided at the time of this report. Used oil is not considered a dangerous waste if it is recycled. According to the current owner, used oil from the facility is recycled in two oil burners that heat the two shop buildings. Universal wastes are generated at the subject property and include fluorescent light tubes and batteries. 3.5.2 Non-Hazardous Waste Non-hazardous solid waste sources include spent blast grit, oily debris, and garbage generated in the office building. Blast grit is the largest source of non-hazardous solid waste. The annual volume of blast grit used in 2007 was approximately 100 to 1,000 tons. Oily waste is burned in a SmartAsh burner. The majority of non- hazardous waste is disposed of in the Kenai Peninsula Borough landfill. The landfill requires that SSD characterize wastes for benzene, toluene, ethylbenzene, and xylenes (BTEX), gasoline-range organics (GRO), diesel- range organics (DRO), residual-range organics (RRO), total halogenated volatile organic compounds (HVOCs), and toxicity characteristic leaching procedure (TCLP) for lead, arsenic, and chromium. 3.6 WATER, WASTEWATER,AND STORM WATER 3.6.1 Water The facility obtains water for sanitary kitchen use from the City of Seward. The SMIC has a water supply well and water tank located north of the E R N I 8 SOLSTICE/0230020/APRIL 2014 Spring Creek Correctional Center (northeast of the SMIC). The well is up- gradient of the subject property. 3.6.2 Wastewater Sanitary wastewater is discharged to the City of Seward municipal wastewater treatment system. Mixed wastewater (from vessel washing) and stormwater from SSD is currently discharged to the Transfer Pit and an associated French drain. Regulators, including the USEPA, have identified the French drain as a potential Class 5 Underground Injection Control (UIC) system. However, the facility has not yet registered the drain as a UIC device. Stormwater is discussed below in Section 3.6.3. The management of other wastewater streams from SSD, under both historical and current operating conditions, is discussed below. 3.6.2.1 Waslidown Water from Work Bays The current USEPA-issued NPDES permit authorizes the discharge of washdown water without treatment,but requires quarterly monitoring for sheen in water from four sediment traps located in the Transfer pit. 3.6.2.2 Ballast Water The NPDES permit does not authorize the discharge of ballast water. SSD contracts Emerald Alaska, Inc. to manage the ballast water from client vessels. 3.6.2.3 Floodwater No flood water comes into contact with the SSD's working surfaces. Work is only performed in the three work bays located inland from the SynchroLift dock. 3.6.2.4 Bilge Water The NPDES permit does not authorize the discharge of ballast water. The client contracts Emerald Alaska, Inc. to manage bilge water from client vessels. ir... ERM 9 SOLSTICE/023(X)20/APRIL 2014 3.6.3 Storm Water Stormwater from SSD is currently permitted under the USEPA-issued National Pollutant Discharge Elimination System (NPDES) permit number AKR05CB23, issued April 21, 2009. The ADEC has primacy over the issuance of NPDES permits (now called Alaska Pollutant Discharge Elimination System [APDES] permits) in Alaska. The average annual precipitation in Seward is approximately 68 inches. Precipitation that falls on the upland subject property is captured by the Transfer Pit, runs off-site by sheet flow, or infiltrates into the ground surface. The Transfer Pit has four sediment traps that collect the water. The outlets of the sediment traps lead to a French drain system. There are no storm water outfalls from the SSD lease area to Resurrection Bay. Water flowing over the work bays is not treated. SSD received a notice of violation (NOV) regarding their NPDES permit on June 28, 2013 based on an April 10, 2013 inspection. ERM does not have a copy of the inspection report or the NOV, but it reportedly requires SSD to file monitoring reports on a timely basis and use best management practices. Until the issues in the NOV are resolved,SSD is in technical violation of its lease agreement with the City of Seward. 3.7 AIR EMISSIONS ERM did not observe reportable air emission sources on the subject property. However, between December 2004 and February 2007 the ADEC received more than 20 complaints regarding fugitive dust. The ADEC file for the site indicates that two Air Quality violations have been issued to SSD; one on May 13, 2005 and one on February 23, 2007. ADEC required SSD to develop and implement BMPs for fugitive emissions. SSD subsequently developed a plan to control fugitive emissions;however, the plan may be inadequate as fugitive emissions have continued to be the subject of citizen complaints. 3.8 POLYCHLORINATED BIPHENYLS (PCBS) PCB results from the 2007 USEPA Site Inspection indicated that Aroclor- 1254 was present above background levels in the covered bay and in the southern uncovered bay. One sample collected from the stockpile ERNI 10 SOLSTICE./0230020/APRIL 2014 exceeded ADEC cleanup level for PCBs of 1 milligram per kilogram h.. (mg/kg). 3.9 VISUAL INDICATIONS OF ON-SITE IMPACTS ERM did not observe indications of on-site dumping, land disposal, or contamination during the site inspection. Other than issues with spent sandblast grit described previously, a review of available records did not identify historical waste disposal on site. Due to snow and ice cover, there were no observations regarding the absence or presence of soil staining. No oil stains were observed on the snow. 3.10 ASBESTOS-CONTAINING MATERIALS (ACMS) Asbestos was banned in most friable building materials (spray-applied surfacing materials and thermal system insulation) in 1978, but the Occupational Safety and Health Administration deems spray-applied surfacing materials, thermal system insulation materials, and vinyl flooring materials as "presumed asbestos-containing materials (PACMs)" if they are present in pre-1981 buildings (29 CFR Parts 1910.1001 and 1926.1101). Historical records indicate that the buildings were constructed on or after 1988. As a result, PACMs are not likely to have been used in building construction. According to Mr. Pruitt, small amounts of asbestos waste are generated from repairs performed on older vessels. SSD contracts an environmental consulting firm to abate, remove, and/or dispose of the asbestos material. ERM 11 SOLSTICE/023(H)20/APRIL 2014 4.0 ASSESSMENT OF PAST LAND USE AND OPERATIONS 4.1 GENERAL INFORMATION Based on interviews with site personnel and a review of historical photographs and records, the subject property is operated by SSD under an agreement with the owner, the City of Seward. Initial development activities included dredging and filling to raise the site to the current elevation. SSD moved to the facility in 1988. The SSD facility has undergone several improvements since initial construction. 4.2 HISTORICAL ENVIRONMENTAL REPORTS ERM was provided with several historical reports for the subject property. A summary of the reports is presented below. 1) Seward Ship's Drydock Site Inspection, Seward, Alaska. Prepared by: Ecology and Environment, Inc. (E&E) 2007. Prepared for: the USEPA. E&E performed a site inspection for the USEPA in 2007. E&E collected nineteen surface soil samples from suspected sources across the subject property. The results indicated that: • Benzo(a)pyrene and DRO exceeded ADEC soil cleanup levels in the Transfer Pit and the Covered Bay; • Only DRO exceeded soil cleanup levels at the Solvent Storage Area and Maintenance Building; and • Benzo(a)pyrene, Aroclor-1254, and DRO exceeded cleanup levels in the spent sandblast grit stockpile. The report compared the sample results to a background soil sample collected approximately upgradient of the subject property, along Fourth of July Creek. E&E also collected three sediment samples: two from the banks of Resurrection Bay and one from a north-south oriented ditch that runs overland east of the site. The results for the ditch sample indicated that arsenic, chromium, and DRO were elevated with respect to a background sediment sample collected approximately three miles away. The results from the two Resurrection Bay samples were comparable with respect to the background sample. ERM 12 SOLSTICE/023(X120/APRIL 2014 The Site Inspection Report concluded that hazardous substances were present at significant concentrations throughout the subject property, but that no hazardous substances were detected in the samples from Resurrection Bay at elevated concentrations with respect to background concentrations. Based on the findings of the 2007 investigation EPA determined that no further action was required under the Federal Superfund program was warranted at the site unless new information warranting further consideration was discovered. On 16 January 2014, SSD received a letter from EPA stating that the findings of a 10 April 2013 Stormwater Inspection Report by the ADEC indicated that the Transfer Pit drainage and French drain system were conditions not previously investigated and considered in the 2007 site inspection. EPA determined that a re-assessment of the site may be warranted to determine any potential impacts the subsurface and groundwater. 2) Field Summary Report For Spent Sandblast Media Characterization & Disposal Program, Seward Ship's Drydock, Incorporated, Seward, Alaska. Prepared by: TELLUS Ltd., February 2009. Prepared for: SSD. In September 2008, TELLUS, Ltd. screened and sampled the SSD spent sandblasting grit stockpile for BTEX, GRO, DRO, RRO, HVOCs, semi- volatile organic compounds,Synthetic Precipitation Leaching Procedure for the previous methods, and TCLP for inorganic compounds. TELLUS, Ltd. provided the results to the Kenai Peninsula Borough for approval of disposal at their Central Peninsula Landfill (CPL) facility. After receiving approval, Tellus hauled the grit to the CPL for disposal. 3) Field Summary Report For Solvent Storage Area Characterization Activities, Seward Ship's Drydock, Incorporated, Seward, Alaska. Prepared by: TELLUS Ltd., March 2009. Prepared for: SSD. In September 2008,TELLUS, Ltd. screened and sampled a segregated soil stockpile produced when contaminated soil was removed from the Solvent Storage Area on the northeastern portion of the property. TELLUS collected two samples from the previously excavated area and two samples from the stockpile. The samples were analyzed for BTEX, GRO, DRO, RRO, SVOCs, target analyte metals, and tributyltin (TBT). The excavation area samples were found to contain low levels of several compounds; the results were below the most stringent current ADEC sane 13 SOLSTICE/023(X)20/APRIL 24114 soil cleanup levels. The results of the stockpile samples were found to have elevated levels of several analytes; the results exceeded ADEC ej cleanup levels for DRO, chromium, and tributyltin. The report indicated that disposal options were being considered. 4) Interim Field Summary Report for Cleanup, Investigation &Site Characterization Program, Seward Ship's Drydock, Incorporated, Seward, Alaska. Prepared by: TELLUS Ltd., September 2009. Prepared for: SSD. TELLUS completed a sampling program in July and August 2009 that included 58 soil borings from across the lease area. Nine of the borings were advanced in the transfer pit. TELLUS collected one sample from each boring from a depth of 1.5 to 2.5 feet. The samples were analyzed for GRO, DRO, RRO, and BTEX only. The report indicated that compounds were either not detected or present at low levels in all of the samples. All results were below the ADEC soil cleanup levels. The report concluded that the subject property did not contain significant petroleum hydrocarbon impacts. 5) ADEC Decision Document: Seward Ship's Drydock Cleanup Complete Determination. Prepared by: ADEC, March 2013. Letter sent to SSD. The ADEC determined that soil cleanup of the site was complete,based on the following points: • The spent sandblast grit stockpile and the Solvent Storage Area soil were removed and transported for disposal to the Kenai Peninsula Borough landfill; • No petroleum hydrocarbons were detected in 2009 confirmation samples from the subject property; • ADEC calculated average contaminant concentrations from the 2007 E&E report and found that benzo(a)pyrene, arsenic, chromium, and copper were the only contaminants of concern to exceed ADEC soil cleanup levels; • Arsenic and chromium occur naturally in Alaska soils; • Copper exceeds only the migration to groundwater cleanup level and the subject property and surrounding area are served by water from the City of Seward public drinking water system; and • Benzo(a)pyrene is produced by incomplete combustion of organic material and exhaust from internal combustion engines is the most likely source of this compound. The ADEC feels that the benzo(a)pyrene likely collects on the spent sandblast media during ERM 14 SOLSTICE/0230020/APRIL 2014 sandblasting operations and is periodically removed along with the ... spent media. The letter states that the determination does not preclude the ADEC from requiring additional assessment if future information suggests that the subject property may pose an unacceptable risk to human health or the environment. 4.3 EVALUATION OF HISTORICAL INFORMATION SOURCES To determine past uses of the subject property and surrounding properties, ERM reviewed historical sources of information as outlined in Table 1 below. Copies of historical photographs, topographic maps, and aerial photographs are presented in Appendix B. Table 1 Summary of Historical Records Reviewed Name/Years Reviewed Source of Information Subject Property Adjacent Properties am. Interview(s)with current Mr.Jim Pruitt Mr.Jim Pruitt occupant and/or owner Interview(s) with past Ms. Donna Glenz(Seward Ms. Donna Glenz,Seward owners/occupants,(if City Planner)and Mr. Mack City Planner appropriate) Funk(Harbormaster),City of Seward Interview(s)with Not readily available Ms. Donna Glenz,Seward owner/occupants of City Planner neighboring and nearby properties(in cases of abandoned subject property) United States Geological 1983 and 1997 1983 and 1997 Survey Topographic Maps City Directories Not readily available Not readily available Sanborn Maps Unmapped property Unmapped properties Historical Photographs 1919 and 1921 1919 and 1921 Aerial Photographs 1950,1978,and 1985 1950,1978,and 1985 ERNI 15 SOLSTICE/0210(1_0/AI AERIE 2014 50-year Chain-of-Title Not provided Not requested 4.3.1 Subject Property A chronological history of the subject property based on available historical records is provided in Table 2. Table 2 Chronology of Subject Property Uses Date Description 1980 to 1985 The SMIC was developed by filling the Fourth of July Creek delta with quarried and/or dredged material from Resurrection Bay. 1988 SSD moved its facilities to the SMIC,leasing Block 7,Lots 1A and 3 1988 to the The subject property(Block 7, Lot 1A) is currently operated by SSD present under an agreement with the owner,the City of Seward. The facility has undergone frequent improvements since initial construction. 4.3.2 Adjacent Properties and Surrounding Area The portion of Block 7, Lot 4 north of the subject property is currently the "'r city washdown pad. The pad was developed in October 2013. Before that time, the area was used as a driveway for the boat lift. The portion of Block 7, Lot 4 east of the subject property is currently used by the City of Seward for storing derelict boats. Block 6 is immediately east Block 7. The undivided portion of Block 6 is not presently being leased but was used as a motorcycle race track between 2006 and 2011. Block 6, Lot 1 is being leased by Global Tower Partners who constructed a cell tower in 2011. The portion of Block 7, Lot 4 south of the subject property is part of the City's active boatyard. Two boats are currently parked in that area. Block 8 is southwest of Block 7. Lot 1 is leased by the U.S. Coast Guard and is used as a radio facility. The remainder of Block 8 is undeveloped and un- leased. Table 3 Chronology of Surrounding Area Uses Date Description ERNI 16 SOLSTICE/0290020/APRIL 2014 Date Description aim 1950 The area around Fourth of July Creek is undeveloped. 1978 The area appears to still be undeveloped. 1985 Nash Road has been added.The SMIC has been filled in and the SynchroLift dock is in place.The parcels do not appear to have been leased yet. Ism ERNI 17 SOLSTICE/0231X)20/APRIL 20 I 4 • 5.0 DATABASE AND GOVERNMENT RECORDS REVIEW 5.1 GOVERNMENT RECORDS REVIEW/INTERVIEWS ERM reviewed available information from the USEPA Envirofacts and ECHO internet databases, the City of Seward website, the ADEC website, the Borough Assessor, and the Alaska Geographic Information System Internet sites. Information obtained from these sources is summarized in the appropriate sections of this report. 5.2 ENVIRONMENTAL DATABASE SEARCH ERM contracted EDR to conduct a database search for agency records. The EDR Database Search results, presented in Appendix E, define and summarize the ASTM databases reviewed in the EDR report and note if any sites (including the subject property) were identified in the specified radius. The locations of the sites identified in the EDR report were evaluated to determine which sites were within the ASTM-specified search distance from the subject property boundary. Only those sites within the ASTM-specified distances are discussed below. eij It should be noted that the computerized geocoding technology used in the database search is based on available census data and is only accurate to ±300 feet. The EDR report provides a list of unmapped sites for which inadequate location information was provided. ERM has reviewed the list of"unmapped" sites to determine if these sites are within the study radius. If the "unmapped" sites appeared likely to be within the search radius for a specific database, they are discussed in the sections that follow. Sites identified within the study radii were evaluated to determine if they are likely to have adversely impacted the subject property. The criteria used to evaluate the potential for adverse impact to the subject property include: • Distance from the subject property; • Expected depth and direction of groundwater and surface water flow; • Expected storm water flow direction; and • The presence/absence of documented contaminant releases at the identified sites that have not been remedied to the satisfaction of regulators. ERN1 18 SOLSTICE/0280020/APRIL 2014 The identification of a site as potentially upgradient or downgradient is based on the expected direction of groundwater flow to the west- southwest(towards Resurrection Bay). However, given the relatively flat topological conditions at the site and tidal fluctuations, groundwater flow direction could be variable. The EDR search identified the following properties in the EDR Database Search. The subject property and properties with the potential to adversely impact the subject property are discussed below. 5.2.1 Subject Property The subject property address, Mile 7 Nash Road, was listed in the CERC- NFRAP and ERNS databases searched by EDR. The CERC-NFRAP listing is for hazardous waste sites that have been removed from the inventory of CERCLIS(Comprehensive Environmental Response, Compensation, and Liability Information System) and have been designated "No Further Remedial Action Planned." The USEPA has determined that the subject property does not qualify for the National Priorities List based on existing information as of November 2007. Imp The subject property is listed twice the EDR report in the Emergency Response Notification System(ERNS) as discussed below: • On August 19, 2005 during the hauling of the 117-foot"Western Mariner" fishing vessel, 2 quarts of used oil was discharged into Resurrection Bay. Absorbent boom was applied to clean up the spill. The responsible company was listed as Western Mariner LLC. • On August 8, 2005 an employee of SSD spilled paint into Resurrection Bay. The volume of the spill was not reported and no cleanup was reported. Mr. Pruitt has stated that work is only performed in the upland work bays. Mr. Pruitt has not yet responded to questions regarding the spill. Note that both spills occurred on the dock, which is not on the subject property lease. 5.2.2 Surrounding Properties Surrounding sites identified in EDR's review of available databases are summarized in Table 4. ERNI 19 soLS[ICE/023(X)2n/APR!.2(114 Table 4 Summary of Findings from EDR Report .rr Radius Database Searched Sites (miles) Found ERNS 0.25 1 A hydraulic line burst on a crane operated by Polar Seafood (SMIC Lots 2 and 2A,Block 9) releasing hydraulic oil to the dock and Resurrection Bay The number and type of sites identified in Table 5 are consistent with the history and nature of the surrounding area. When evaluating the potential adverse impacts of off-site properties, ERM considered their position relative to the reported groundwater flow direction. The Polar Seafood site is cross-gradient of the subject property with respect to groundwater flow direction and assumed to not have a potential adverse impact on the subject property. j ERN 20 SOLSTICE/0230020/APRIL 2014 6.0 Data Gaps Table 5 below summarizes the data gaps identified during the site assessment. The significance of the data gaps with respect to the conclusions of this assessment is indicated. Table 5 Data Gap Szimmanj Data Gap Sources Consulted to Address Significance' Data Gap Interviews with former ERM reviewed historical maps Low owners/operators (prior to and photographs,contacted current owners/operators)on local and state officials and the surrounding property. regulatory agencies,and reviewed previous reports to obtain information about the surrounding properties. An Environmental Lien Search Title information was obtained Low was not conducted for the by the User and was provided subject property. to ERM for review. No liens were identified in the title report. I Significance of data gaps to identify conditions indicative of releases or threatened releases to the subject property is rated from low to high. Low significance indicates that additional information to fill the data gaps is likely to have no impact on the conclusions reached in this report. Medium ratings indicate that additional information may prove valuable,but may not significantly alter the conclusions of this report.High significance indicates that it is the consultant's opinion that additional investigation(either from reports or field sampling)is required to address the data gap. ERN7 21 SOLSTICE/023(X)20/A 1441.2014 7.0 USER AND OWNER PROVIDED INFORMATION 7.1 USER AND OWNER/OPERATOR QUESTIONNAIRES ERM contacted the client ("User") and owner/operator to determine the status of potential environmental concerns at the subject property. The following information about the subject property was requested: • An evaluation of the presence of Environmental Cleanup Liens for the subject property; • Activity and Use Limitations (AULs) such as engineering controls (e.g., slurry walls, caps) and land use restrictions or institutional controls (e.g., deed restrictions, covenants) that may be in place for the subject property; • Specialized Knowledge that includes personal knowledge or experience related to the subject property or nearby properties based on professional experience or knowledge of the subject property; • Fair Market Value to evaluate whether a purchase price is significantly below fair market value; • Obvious Indicators that involve past or present spills, stains, releases, r cleanups on or near the subject property; and • Common Knowledge about specific chemicals, possible contamination, or past use of the subject property and surrounding area. The User and Owner/Operator Questionnaires for Phase One Additional Inquiries (User and Owner/Operator Questionnaire) were not completed for the subject property. Copies of the blank questionnaires are included in Appendix D. 7.2 TITLE RECORDS Title record information and/or a 50-year Chain of Title was not provided by the User or Owner/Operator for review by ERM. 7.3 ENVIRONMENTAL LIENS OR ACTIVITY AND USE LIMITATIONS ERM did not retain EDR to provide an environmental lien and AULs search for the subject property. Additionally,no information provided in ERNI 22 SOLSTICE/0290020/APRIL 2014 the Owner/Operator questionnaire regarding liens or AULs associated with the property. 7.4 SPECIALIZED KNOWLEDGE The owner/operator and User had specialized knowledge regarding former and current activities associated with the subject property. Specialized knowledge was provided to ERM after the site visit and is incorporated into this report. 7.5 COMMONLY KNOWN OR REASONABLY ASCERTAINABLE INFORMATION The operator indicated the site has been used by SSD as a ship repair yard since 1988. Additional information provided by the operator indicated the subject property is owned by the City of Seward. 7.6 VALUATION REDUCTION FOR ENVIRONMENTAL ISSUES The User did not identify any reasons for a valuation reduction associated with potential environmental issues. 7.7 OWNER, PROPERTY MANAGER,AND OCCUPANT INFORMATION Information pertaining to the subject property was obtained from the owner/operator. Entity Name Subject property owner City of Seward Subject property operator SSD Current subject property SSD occupant(s) 7.8 REASON FOR PERFORMING PHASE I The Phase I ESA was performed to provide assistance to the User in association with a proposed transaction involving the operator. ERNI 23 SOLSTICE/11231x120/APRII 2014 7.9 NON-REGULATORY INTERVIEWS Information obtained from the current site operator is discussed in the applicable sections throughout this report. ERNI 24 SOLS l ICE/0230020/APRIL 2014 8.0 CONCLUSIONS/RECOMMENDATIONS EM conducted a Phase I ESA of the subject property. ERM's conclusions and opinions are based on a scope of work that followed the requirements set forth in ASTM Standard E 1527-05 and 40 CFR 312. A summary of ERM's conclusions and opinions is presented below. Based on the data obtained during the site visit, the environmental database review, and interviews with persons familiar with the site and its history, the following RECs were identified at the site: • Vessel washwater and site storm water are discharged to the Transfer Pit and French drain. The quality of discharges is evaluated visually as part of the requirements of the facility stormwater permit. The permit only requires SSD to visually inspect the water in the Transfer Pit for evidence of an oily sheen. Washwater and storm water comes into contact with areas of metals and chemical use and storage throughout the site, including fabrication, raw material storage, painting activities, non-hazardous waste storage, and used grit storage areas. Therefore, it is possible that organics and metals (including copper, zinc, lead, and chromium) and possibly tributyltin, from current or former SSD operations, may become entrained in storm water and be discharged to the subsurface. Organics and metals in surface water and/or sediment could pose a risk to ecological marine receptors. • Although wastewater is discharged to the unpaved ground surface and to a French drain, groundwater conditions were not evaluated by the USEPA,SSD, or Alaska Department of Environmental Conservation (ADEC) as part of site investigations conducted between 2007 and 2010. The investigations only addressed the condition of shallow soil and/or intertidal sediment. In 2013, ADEC issued a "No Further Action" letter for conditions associated with shallow soil and sediment contamination identified at the site. Material Compliance Issues • ADEC and the City of Seward require SSD to comply with Best Management Practices for their site activities. In 2012, the City indicated that SSD is technically in default of the Lease as a result of four unresolved Notices of Default issued by ADEC. The City administration recommended allowing the Lease to continue, without waiving any rights of the City, with the understanding and expectation that environmental compliance matters will be dealt with and resolved between SSD and DEC. Based on a 2008 ADEC fact ERNI 25 SOLSTICE/0230020/APRIL 20I4 sheet, the facility was issued a Notice of Violation to SSD in February 2007 for failing to follow the dust control plan they committed to in mai spring 2006. City of Seward records indicate the facility continued to receive complaints about dust control issue and received another NOV in April 2013. No information regarding the specific NOV issues or resolution was provided by ADEC or SSD. SSD has also not prepared BMPs for wastewater discharges, stormwater discharges, registered the French drain as a UIC device, or prepared a site specific Spill Prevention Control and Countermeasure (SPCC) Plan. De Minintis or Other Potential Issues While not RECs, ERM identified concerns that are summarized below and are discussed in greater detail in the body of the report: • The quality of the sediment in the boat basin has not been evaluated. A recent$10 million grant to the City of Seward, for in-water and upland improvements to SMIC, includes funds for the dredging of 5 to 10 feet of material from the boat basin. SSD indicated it has not conducted any repair activities on or over water. • SSD reportedly disposed of approximately 189 cubic yards of spent sandblast grit on a private off-site property in 2004. As the result of public complaints, ADEC investigated the disposal activities and required SSD to excavate the material for disposal in a licensed landfill by 2005. 4 ERM 26 SOLS F ICE/0230020/APRI I_2014 9.0 QUALIFICATIONS OF ENVIRONMENTAL PROFESSIONALS CONDUCTING THIS ASSESSMENT Ms. Lisa Nicholson of ERM's Anchorage, Alaska, office and Mr. Bob Carson of ERM's Portland, Oregon, office conducted this assessment. Mr. Erik Ipsen, of ERM's Portland, Oregon, office, reviewed the contents of this report. The professional qualifications for Ms. Nicholson, Mr. Carson, and Mr. Ipsen are included in Appendix F. The signatures for Ms. Nicholson, Mr. Carson, and Mr. Ipsen are affixed on the cover of this report. We declare that, to the best of our professional knowledge and belief, we meet the definition of Environmental Professional as defined in 40 CFR 312.10. We have the specific qualifications based on education, training, and experience to assess a property of the nature, history, and setting of the subject property. We have developed and performed the AAI in conformance with the standards and practices set forth in 40 CFR 312. how kINNIN ERNI 27 SOLSTICE/o232 /APRIL 2014 10.0 LIMITATIONS earl The innocent landowner, contiguous owner, and prospective purchaser defenses to liability under the Comprehensive Environmental Response, Compensation and Liability Act(CERCLA) requires that a person acquiring a property conduct an AAI with respect to the subject property. ERM has conducted this ESA in accordance with the standards for conducting an AAI set forth at 40 CFR 312. Those standards require the application of scientific principles and professional judgment to certain facts with resultant subjective interpretations and exercise of discretion. Professional judgments expressed herein are based on the facts currently available within the limits of the existing data, and data gaps identified herein, scope of work, budget, and schedule. Those standards also require that the client undertake certain additional inquiries. In addition, the liability defenses under CERCLA require, among several other things, that the client after the acquisition stop any continuing releases, prevent any future threatened releases and prevent or limit human, environmental or natural resource exposure to any hazardous substance released at the subject property. Therefore, ERM makes no warranties, express or implied, including,without limitation, 4,J warranties as to merchantability or fitness for a particular purpose, including any warranty that this Phase I ESA will in fact qualify client for the innocent landowner, contiguous property owner or prospective purchaser defense to liability under CERCLA. ERM's assessment is limited strictly to identifying RECs associated with the subject property. Results of this assessment are based upon the visual site inspection of readily accessible areas of the subject property conducted by ERM personnel, information from interviews with knowledgeable persons regarding the site, information reviewed regarding historical uses, information provided by contacted regulatory agencies, and review of publicly available and practically reviewable information identifying current and historical uses of the property and surrounding properties. All conclusions and recommendations regarding the subject property represent the professional opinions of the ERM personnel involved with the project, and the results of this report should not be considered a legal interpretation of existing environmental regulations. ERM assumes no responsibility or liability for errors in the public data t ERNI 28 SOLSTICE/0230020/APRIL 2014 utilized, statements from sources outside of ERM, or developments resulting from situations outside the scope of this project. We make no warranties, express or implied, including, without limitation, warranties as to merchantability or fitness for a particular purpose. ERM 29 SOLST ICE/0230020/A I'R I L 2014 Figures — , - ",'' - ,•-•r...):2-.":"4 "•••''•„, ' ' '''' ' - '.•;1•i"'''' `-'-`,--''' . ‘,10 •-er ' *.— .'"yt, . i h'if ''''" '—'"' . , I' ',/ i ' .. 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'fi 'l !i ,. , , , .. ,-. . ,.i ,:-..:. ,,,iy-is,.,',....,,' -.;:.,t.,,„ ,,,,,2,::. .,,.„,,,,, a, •,',...4.%: -z' ' ''''`;',.'" •-_,It'iik,,t-oz' '''.` 't %, ' i'illt-z' . ''4.0..A..1Rh4 *,r-,z'i l':11-141 14 1;gf4t f, '. ... sz , , ' 7- ;i I ,,A ,,,,,-. E• , t *VVI'''\,.k.i,„,,„,..:, ` ' !,,,,,,,,,-.31,,,,k0:vc, ,• ,4 2s.„„, ,..,..//,_, Subject Property ; NI---:„.- 7„7-:-,_;-- _. ' 'q1-;-- z , / - ' 1 _ ,..-- „..4,,,,„)^",-„i. ....,:, ',,,, „,',' '), 1„, ', 711 -,',r.-,..--,,I.. -_,..--.7---.•;)'' , - .,..: —1--/ ia .- '-: ': , ,' ,_ .', ---,,,-- zz",-,--- -:-4.--,,_-- m ,/ / ',$tat,cf, ,,-," — . - .. „ "!- , 1 ,,t— ,.-„i5,-, ' 4't -',C , . 1, , '' 7 ,fk ' :.:-.1f ' -\---''',. -' ''\'.--•'. ' 71.,',„^ . i. , ',-1--'',- ' i '' ',*--.4r '' - \ ..t ''''''.r*P°fr't .L,'ItN,,, ,:i , „,, 4', ' 4.` Me 5- .1.,''' ,...''''.• 4.-i :,'” ALASKA MARITIME / fyS ,,-1 ,.._ ' ,I.-....' . ~-1:-.I :,, -'- " ' ` / ,' i"I.- 1.r.-■,_ ' . / -/ i'''',' . ',.',' ,, 51: 1'.'/-4& c'—' ,i/,/,-\,, ,,..‘-,...----, /-• ' ,= , 4•"'---**7."•-•-. ' /t-t', '''' i ,.' NATIONAL WILDLIFE REFUGE vf ,,.-- ; ' ::-.4', 4., , -,. , , )V. 1.-t) i- . , '',,,'', 575 , , „ 24M ' ' ‘,\.,. Fi-g, -,u r, e 1 lit IN Site Vicinity Map IZI Project Solstice Seward, Alaska te: Drawn By: Checked By: Project No.: ERM. 'Me 01/20/14 BC El 0230020 — j h MM/f � b is s t� y ,r'^ 7 "1 w {Sete Locations` 7 � o zo w ec OM s Lam'£ ..i '•° P + t .. �� 2 �'; r. �9 y f 6A, . fi.4,:.„,,,. ...... . \ - .. r� """��YrY� ~~y� e�T�Rwrf�f'7�f1 x„ •a • r ., � M � 3x t ■ .At*r�,�4YY'f`il SiYf'tf �s; r.'�Y a-. ���, t a S • _ °1k may., ' •� Y mot'.' y� '� a. K - - - - '•'S1 ;�.C� � �' ti"�`I "e�tYXik �srrov j. �� ?�"�«""°„u•,. y � legend • r x' -� Anin ilnli,l D r r n��r��1 I'�I�In Ai,r•.+An.r A1n ral,r•rl By SSD Gn�� r. _.J SSD L�+��Iv�Id An n Dr•iin�y�•Dili lr _ �tll ° SSD OIv rnl„n.il An•i B���n,lnry ,� . ' Y __ sl��mw.li r Inl�ln nnin�I'Iv' © en�Iv „I Dn rlpr•An n aayi .:''''..":,i....,:- 0 90 180 �oeet Figure 2 rz r` Safes Layout �.J N I Projec olstice ssD-s•..,rrd shq,.rnee Seward,Alaska ... , L , H 1 . , ,.. ..k ,, .., , 1 , , ; - t I I a ' 1 [ a, p a. 1P, I L 1 . ..... . , Vigor Industrial, LLC Phase Solstice Report Project II Investigation ctS Seward Ships Drydock Seward, Alaska 16 April 2014 www.erm.com \\\ ..... E .The world's leading sustainability consultancy Table of Contents 1. Introduction 1 1.1 Introduction 1 1.2 Limitations 1 1.3 Uses of report 1 2. Background Information 2 2.1 Introduction 2 2.2 Site Description 2 2.3 Surrounding Land 2 2.4 Historical Land Use 3 2.5 Topography and Geology 3 2.6 Hydrogeology 4 2.7 Historical Environmental Investigations 4 3.Work Performed and Rationale 7 3.1 Introduction 7 3.2 Statement of Phase II ESA Objectives 7 3.3 Health&Safety Procedures Adopted 8 3.4 Scope of Work Completed 8 3.4.1 Upland Drilling Activities 8 3.4.2 Soil Sampling 9 3.4.3 Monitoring Well Installation and Groundwater Sampling 9 3,4.4 Surface Water Sampling 10 3.4.5 Sediment Sampling 10 3.5 Investigation-Derived Waste Management 10 4. Findings &Results 11 4.1 Regulatory Framework 11 4.2 Field Observations 11 4.2.1 Soils 11 4.2.2 Groundwater 11 4.2.3 Surface Water 11 4.2.4 Sediment 12 4.3 Soil Sample Analysis Results 12 4.4 Groundwater Analysis Results 12 4.5 Surface Water Analysis Results 12 4.6 Sediment Analysis Results 13 ERM 1 16 APRIL 2014 L 5. Summary and Conclusions 14 6. References 15 7.Statement of Conformance with ASTM E1903-11 16 fir. hit.. ERM Il 16 APRIL 2014 Attachments ATTACHMENT I FIGURES ATTACHMENT II TABLES ATTACHMENT III FIELD NOTES AND SAMPLING DATA SHEETS ATTACHMENT IV SOIL BORING AND SEDIMENT CORE LOGS ATTACHMENT V LABORATORY DATA SHEETS AND CHAIN OF CUSTODY(Included as electronic file) j ERM 111 16 APRIL 2014 1 . Introduction 1.1 Introduction ERM-West, Inc. (ERM)was commissioned by Vigor|nduutha|. LLC, hereinafter ref nod to as Vigor,to undertake a Phase II Environmental Site Assessment(ESA)at the Seward Ships Drydock facility, located at the Seward Marine Industrial Complex, 7-Mile Nash Road, Seward,Alaska (the Site). The Phase II ESA sampling locations were established to provide an overall representation of Site conditions. Regulatory limits considered in this assessment include those established by the Alaska Department of Environmental Conservation (ADEC) under Alaska Administrative Code Section 18 Chapter 70(18 AAC 70)and Alaska Administrative Code Section 18 Chapter 75 (18 MC 75). This report documents the Phase ll ESA for soil, groundwater, and marine sediment. A Draft Phase I ESA for the Site was completed by ERM in January 2014. Vigor is considering a financial transaction associated with the Site referred to herein as Project Solstice. —�~ 1.2 Limitations The report is based upon the application of scientific principles and professional judgment to certain facts with resultant subjective interpretations. Professional judgments expressed herein are based on the facts currently available within the limits of the existing data, scope of work, budget, and schedule. We make no warranties, express or implied, including,without limitation,warranties as to merchantability or fitness for a particular purpose. In addition,the information provided to Vigor in this report is not to be construed as legal advice. 1.3 Uses of Report ERM is not engaged in conducting environmental studies and reporting for the purposes of advertising, sales promotion,or endorsement of any client's interests, or other publicity purposes. Vigor acknowledges that any reports prepared by ERM are for the exclusive use of Vigor and agrees that ERM's reports or correspondence will not be used or reproduced, in full or in part,for such promotional purposes, and may not be used or relied upon in any prospectus or offering circular. Vigor also agrees that none of its advertising, sales promotion,or other publicity matter containing information obtained from this work and report will make reference to ERM's trade name. Nothing contained in the report provided by ERM shall be construed as a warranty or affirmation by ERM that the Site and property described in the report are suitable collateral for any loan, or that acquisition of such property by any lender through foreclosure proceedings or otherwise will pose no risk of potential environmental liability on the part of such lender. ERM 1 16^pmL 2014 2. Background Information 2.1 Introduction This section summarizes the current Site setting and historical land use,which are described in detail in ERM's Draft Phase I ESA report dated January 20, 2014. 2.2 Site Description The general location of the property and the physiographic features of the surrounding area are shown on Figure 1, developed from the United States Geological Survey(USGS) 7.5-minute quadrangle for Seward,Alaska, dated 1995. Figure 2 provides a site layout, including leasehold boundaries and major site features. The Seward Ships Drydock(SSD)operations are conducted on Block 7 of the Seward Marine Industrial Center(SMIC) located at Mile 7 Nash Road, Seward,Alaska. The Site is currently owned by the City of Seward. According to the Kenai Peninsula Borough Tax Assessor records, the Site contains 7.34 acres of land and consists of Parcel Number 14534046. SSD leases mai Lot 1A and Lot 3 of Block 7. The area leased by SSD includes: • Two uncovered work bays and one covered work bay(Lot 1A), connected by a rail system to the 250-ton SyncroLift; • Uplands repair berth (Lot 3)with a rail and key system that allows ships to be moved from the Travelift to the shipbuilding zone; • The Fabrication Building that is an approximately eight-story high,three-sided building for vessel construction and repair, that also contains an office space; • Metal storage/lay-down areas; • Gravel parking lot; • Oil/water separator with containment; • Hazardous materials storage building; • A non-hazardous waste storage area (uncovered); and • Office trailers. SSD also conducts operations in the SMIC but outside the leasehold area, including:the SMIC Boat Basin; Travelift,the 250-ton Marine SyncroLift, and the associated dock rail system and transfer pit. Vessels are transported from the SyncroLift on the rails to the transfer pit,then to upland concrete berth into the fabrication building. The open side of the fabrication building can be curtained to protect the vessels from precipitation. 2.3 Surrounding Land The subject property leasehold is located in a marine industrial area across Resurrection Bay from the Seward,Alaska, townsite. The abutting properties and nearby land use include: ERM 2 16 APRIL 2014 • North: City of Seward Washdown Pad (Block 7, Lot 4); • East:The eastern portion of Block 7, Lot 4 is used for storing derelict boats.The city moves the boats to this location when they have been abandoned in the boat storage area. Block 6 is immediately east of Block 7. Only Lot 1 is currently leased by Global Towers for placement of a cell tower; • South:The southern portion of Block 7, Lot 4 is part of the active boatyard and two boats were parked there at the time of the site visit. Block 8,south of Block 7 is unleased, undeveloped land in the alluvial fan of Fourth of July Creek;and • West:A boat basin and dock with a 250-ton Marine SyncroLift for pulling vessels out of the water. Based on ERM's observations,the closest residences are located approximately one mile north of the subject property on Nash Road. No visual evidence of environmental concern was observed on immediately surrounding properties. 2.4 Historical Land Use The SMIC was developed by filling the Fourth of July Creek delta with quarried and/or dredged material from Resurrection Bay between 1980 and 1985. By 1988 SSD moved its facilities to the SMIC, leasing Block 7, Lots lA and 3. The subject property (Block 7, Lot 1A) has been operated by SSD since 1988 under an agreement with the owner,the City of Seward.The facility has undergone frequent improvements since initial construction. 2.5 Topography and Geology The subject property is located in Seward,Alaska, located in the south-central portion of Alaska on the Kenai Peninsula region. Seward is located at the north end of Resurrection Bay.The SMIC is located at the mouth of Fourth of July Creek across Resurrection Bay from the main Seward townsite.The subject property is part of the SMIC,which was constructed on the northern portion of the Fourth of July Creek alluvial fan with quarried and/or dredged material from Resurrection Bay. is„„ The property is located at an elevation of approximately 15 feet above mean sea level, and is generally flat around the buildings and parking areas.The overall topographic trend of the surrounding area is to the southwest towards Resurrection Bay. Mountains surrounding the site reach elevations of 2,000 feet within one mile of the subject property.The closest surface water features to the subject property are Carlanna Creek, immediately northwest of the subject property,and Fourth of July Creek located south of the subject property.The region is a temperate rainforest with approximately 68 inches of precipitation per year. The Site was constructed on fill material placed on the Fourth of July Creek alluvial fan.The area is discussed in Geological Survey Professional Paper 542-E, Effects of the Earthquake of March 27, 1964. at Seward, Alaska. The publication indicates Fourth of July Creek has built a triangular-shaped fan about two miles long and one mile wide at Resurrection Bay.The fan only projects into the bay a short distance beyond the mountain front and is nearly flat in most places. Fourth of July Creek flows in several channels across the fan.Most of the fan deposits are sand and gravel.The report indicates the thicknesses of the fan deposits are not known but probably exceed several hundred feet along the edge of the bay. The steep underwater face of the alluvial fan at Fourth of July Creek reportedly suffered submarine landslides during the 1964 earthquake Resurrection Bay is a deep fjord about 25 miles long and three to five miles wide,with a maximum depth of 978 feet,According to the SMIC website,the area around the SMIC dock is dredged to a depth of-21 to-25 feet mean lower low water.The City of Seward is proposing to deepen portions of the boat basin to a depth of-30 feet along with other improvements. Shallow groundwater flow would be expected to come from the mountains to the northeast and move southwest towards Resurrection Bay. It is important to note that groundwater flow direction can be influenced locally and regionally by the presence of tidal action, surface topography, recharge and discharge areas, horizontal and vertical inconsistencies in the types and location of subsurface soils,and proximity to water pumping wells.Confirmation of specific geologic and hydrogeologic factors affecting groundwater flow beneath the subject property is beyond the scope of this Phase II ESA. ERM 3 `o APRIL zo`^ Based on information from the City of Seward, a water supply well serves the SMIC located approximately one mile north of the v.j subject property. 2.6 Hydrogeology In preparation for development of the SMIC the USGS completed a hydrologic survey of the Fourth of July Creek area in 1981. The report is entitled; Hydrologic Reconnaissance Near Fourth Of July Creek, Seward, Alaska. USGS Water-Resources Investigations 81-21 and it states, in part: The unconfined alluvial aquifer that underlies the valley flats is composed primarily of sand and gravel. Water infiltrates to the aquifer from Fourth of July Creek, from direct infiltration of precipitation that falls on the fan, and from small streams draining the bedrock walls of the valley. High flow rates and poor filtration of pollutants are characteristics of coarse-grained materials such as those that constitute the unconfined aquifer and the overlying unsaturated materials in the study area. Pollutants, such as oil, chemicals, or biological waste, applied to or spilled on the land surface will rapidly reach the aquifer and migrate downgradient. The alluvial aquifer is therefore susceptible to pollution. The lower 0.5 mi of the fan is particularly susceptible to pollution because the water table is close to the land surface; consequently, both the amount of filtration and the time it takes for the infiltrating water to reach the aquifer are reduced relative to areas upstream. 2.7 Historical Environmental Investigations ERM was provided with several historical reports for the subject property. A summary of the reports is presented below. 1) Seward Ship's Drydock Site Inspection, Seward, Alaska. Prepared by: Ecology and Environment, Inc. (E&E)2007. Prepared for the United States Environmental Protection Agency(USEPA). E&E performed a site inspection for the USEPA in 2007. E&E collected 19 surface soil samples from suspected sources across the subject property.The results indicated that: • Benzo(a)pyrene and diesel range organics (DRO)exceeded Alaska Department of Environmental Conservation (ADEC) soil cleanup levels in the Transfer Pit and the Covered Bay; • Only DRO exceeded soil cleanup levels at the Solvent Storage Area and Maintenance Building; and • Benzo(a)pyrene,Aroclor-1254, and DRO exceeded cleanup levels in the spent sandblast grit stockpile. The report compared the sample results to a background soil sample collected approximately upgradient of the subject property, along Fourth of July Creek. E&E also collected three sediment samples:two from the banks of Resurrection Bay and one from a north-south oriented ditch that runs overland, east of the site. The results for the ditch sample indicated that arsenic, chromium, and DRO were elevated with respect to a background sediment sample collected approximately three miles away.The results from the two Resurrection Bay samples were comparable with respect to the background sample.The Site Inspection Report concluded that hazardous substances were present at significant concentrations throughout the subject property, but that no hazardous substances were detected in the samples from Resurrection Bay at elevated concentrations with respect to background concentrations. Based on the findings of the 2007 investigation EPA determined that no further action was required under the Federal Superfund program was warranted at the site unless new information warranting further consideration was discovered. On 16 January 2014, SSD received a letter from EPA stating that the findings of a 10 April 2013 Stormwater Inspection Report by the ADEC indicated that the Transfer Pit drainage and French drain system were conditions not previously ERM 4 16 APRIL 2014 investigated and considered in the 2007 site inspection. EPA determined that a re-assessment of the site may be warranted to determine any potential impacts the subsurface and groundwater. 2) Field Summa,y Report for Spen Sandblast Media Characterization &Disposal Program, Seward Ship's Diydock, Incorporated, Seward, Alaska. Prepared by: TELL US Ltd., February 2009. Prepared for SSD, In September 2008, TELLUS, Ltd. screened and sampled the SSD spent sandblasting grit stockpile for BTEX, gasoline range organics (GRO), DRO, RRO, HVOCs, semi-volatile organic compounds (SVOCs), Synthetic Precipitation Leaching Procedure for the previous methods, and Toxic Characteristic Leaching Procedure for inorganic compounds. TELLUS, Ltd. provided the results to the Kenai Peninsula Borough for approval of disposal at their Central Peninsula Landfill (CPL)facility. After receiving approval, TELLUS. Ltd. hauled the grit to the CPL for disposal. 3) Field Summary Report for Solvent Storage Area Characterization Activities, Seward Ship's D,ydock, Incorporated, Seward, Alaska. Prepared by: TELLUS Ltd., March 2009. Prepared for: S3D. In September 2008, TELLUS, Ltd. screened and sampled a segregated soil stockpile produced when contaminated soil was removed from the Solvent Storage Area on the northeastern portion of the property.TELLUS collected two samples from the previously excavated area and two samples from the stockpile. The samples were analyzed for benzene, toluene, ethylbenzene, and xylenes (BTEX), GRO, DRO, residual range organics (RRO), SVOCs,target analyte metals, and tributyltin (TBT).The excavation area samples were found to contain low levels of several compounds;the results were below the most stringent current ADEC soil cleanup levels. The results of the stockpile samples were found to have elevated levels of several analytes;the results exceeded ADEC cleanup levels for DRO, chromium, and tributyltin. The report indicated that disposal options were being considered. 4) Interim Field Summary Report for Cleanup, Investigation & Site Characterization Program, Seward Ship's Drydock, Incorporated, Seward, Alaska. Prepared by: TELLUS Ltd.' September 2000. Prepared for: SSD. TELLUS, Ltd. completed a sampling program in July and August 2009 that included 58 soil borings from across the lease area. Nine of the borings were advanced in the transfer pit. TELLUS, Ltd.collected one sample from each boring from a depth of 1.5 to 2.5 feet. The samples were analyzed for GRO, DRD. RRO, and BTEX only. The report indicated that compounds were either not detected or present at low levels in all of the samples.All results were below the ADEC soil cleanup levels.The report concluded that the subject property did not contain significant petroleum hydrocarbon impacts. 5) ADEC Decision Document: Seward Ship's Drydock Cleanup Complete Determination. Prepared by:ADEC, March 2013. Letter sent to SSD. The ADEC determined that soil cleanup of the site was complete, based on the following points: • The spent sandblast grit stockpile and the Solvent Storage Area soil were removed and transported for disposal to the Kenai Peninsula Borough landfill. • No petroleum hydrocarbons were detected in 2009 confirmation samples from the subject property. • ADEC calculated average contaminant concentrations from the 2007 E&E report and found that benzo(a)pyrene, arsenic, chromium, and copper were the only contaminants of concern to exceed ADEC soil cleanup levels. • Arsenic and chromium occur naturally in Alaska soils. • Copper exceeds only the migration to groundwater cleanup level, and the subject property and surrounding area are served by water from the City of Seward public drinking water system; and ERM 5 16 APRIL 2014 • Benzo(a)pyrene is produced by incomplete combustion of organic material. Exhaust from internal combustion engines ma is the most likely source of this compound.The ADEC feels that the benzo(a)pyrene likely collects on the spent sandblast media during sandblasting operations and is periodically removed along with the spent media. The letter states that the determination does not preclude the ADEC from requiring additional assessment if future information suggests that the subject property may pose an unacceptable risk to human health or the environment. ERM 6 16 APRIL 2014 3. Work Performed�� �� �. ����u � x �nuu����uo ���y Rationale . ~~°~"-_ " 3.1 Introduction The investigation was designed and implemented as follows; • In a manner generally consistent with ASTM International (ASTM) Standard E 1903-97 Standard Guide for Environmental Site Assessments:Phase II Environmental Site Assessment Process; " In a manner generally consistent with Vigor protocols; • Following ERM Standard Operating Procedures; and • In accordance with Fedano|.State, and local law. Work was generally conducted in accordance with the Sampling and Analysis Plan outlined in the ERM's proposal to Vigor, dated 20 February 2014, and summarized in Section 3.4. ERM was responsible for the completion of all elements, including the hiring of drilling and analytical laboratory subcontractors. ERM directed and oversaw all elements of the work scope.All work was conducted by properly trained and licensed ERM employees/subcontractors and was conducted in compliance with applicable country and local|awo, and in accordance with established Vigor protocols. Lir 3.2 Statement of Phase II ESA Objectives The work is being conducted as part of the due diligence project, as Vigor is considering a financial transaction associated with the existing facilities and equipment currently owned by SSD.The objectives of the Phase II ESA are to characterize sni|, gmundwoter, surface water, and sediment conditions in areas where recognized environmental conditions were identified in the Phase I EGA.The Phase II ESA will be used to determine if there are any potential environmental liabilities associated with those Site conditions and establish baseline site conditions prior to the completion of the transaction by Vigor.The draft Phase I ESA identified recognized environmental conditions associated with the following issues: • Vessel wash water and site storm water are discharged to the Transfer Pit,which then discharges to the storm water infiltration drain.The quality of discharge is evaluated visually as part of the requirements of the facility storm water permit. The permit requires SSD to visually inspect the water in the Transfer Pit for evidence of an oily sheen prior to discharging. Wash water and storm water come into contact with areas of metals and chemical use and storage throughout the site, including fabrication, raw material storage, painting activities, non-hazardous waste storage, and used grit storage urean. Thomfova, it is possible that organics, metals (including copper,zinc,|ead,and ohmmium), and potentially tributyltin from current or former SSD operations may become entrained in storm water and be discharged to the subsurface. Organics and metals in surface water and/or sediment could pose a risk to ecological marine receptors. • Although wastewater is discharged to the unpaved ground surface and to a French dnain, groundwater conditions were not evaluated by the USEPA, SSD,or ADEC as part of site investigations conducted between 2007 and 2010. The investigations only addressed the condition of shallow soil and/or intertidal sediment. In 2013,ADEC issued a "No Further Action"letter(ADEC 2013)for conditions associated with shallow soil and sediment contamination identified at the site. There are potential impacts associated with deeper soil,gmundwatar, in water sediment, and surface water that were not evaluated in the 2007 and 2010 investigations. ribm ERM 7 16 APRIL 2014 ~INmS^ This investigation was designed to meet customer needs and has not been completed to meet environmental regulatory w�m requirements. 3.3 Health &Safety Procedures Adopted Prior to mobilization for the offurt. ERM prepared a site-specific Health and Safety Plan (HASP)to document the hazards of the work and appropriate procedures and actions necessary to ensure the work was conducted in a safe and compliant manner.All ERM employees and contractors present on the Site attended daily health and safety kickoff meetings during the course of the field effort. The fieldwork was undertaken in accordance with the project/site specific HAGP, by competent and properly trained/licensed ERM hydrogeologists/engineers and contractors. Field personnel were informed about the possible health and safety risks and measures were put in place to mitigate the identified risks. Field personnel wore the necessary personal protective equipment(PPE). Specifiva|ly, all work was conducted under standard Level D protocol (OSHA protocol) consisting of standard dothing/covanaUn, chemically resistant gloves, hard hatx, safety glasses, and steel-toe boots. Prior to commencing intrusive activity or ground disturbance (drilling or excavation) at any location, ERM undertook the following steps in order to avoid contact with any buried nob|en, pipes, or other utilities: • Proposed drilling locations and all available service plans were reviewed by the fieldwork manager, the City of Seward, and the SSD facility manager. • Drilling locations were inspected by the fieldwork manager. • Specialist clearance surveying service was provided by the City of Seward. • An air-knife and "Super-Sucker"equipped with air vacuum was used to physically clear point disturbance locations to 2 feet below the local frost line (approximately 6-8 feet below ground surface[bgs]). 3 �� 3.4 Scope of Work Completed The Phase || ESA scope of work included: • Performing subsurface clearance in accordance with ERM's established SSC program; • Oversight of advancing of 9 buringo, using direct-push drilling technu|ogy,to a maximum depth of 25 feet bgs or refusal; • Collection of two soil samples (shallow and deep) per boring. The shallow sample was submitted for initial laboratory analysis and the deep sample was submitted for archiving and potential follow up analysis; • Oversight of installation of 7 temporary groundwater monitoring points at selected boring locations; • Collection of groundwater samples from each temporary monitoring point; • Collection of three surface water samples from the drainage ditch to the east of the Site; and • Oversight of the advancement of five sediment cores to a maximum depth of 8 feet below the mudline. • Collecting sediment samples on 2-foot increments from the sediment cores. The surface and next-deepest samples were submitted for laboratory analysis, and the remaining samples were submitted for potential follow up analysis. The completed field activities are described below. 3.4,1 Up/and Drilling Activities The upland drilling scope of work consisted of installing soil bohnQs, and collecting two soil samples and one groundwater sample from each boring. One soil sample and the groundwater sample were submitted for initial laboratory analysis. The ERM 8 16 APRIL 2014 second soil sample from each boring was submitted to the laboratory for archiving, pending results of the initial analysis.All upland drilling activities were performed from 26 February to 28 February 2014 by GeoTek Alaska, under ERM's supervision. All borings were advanced to a depth of approximately 6 feet bgs using an air-knife and vacuum, in order to confirm the absence of buried uU|iUoo, in accordance with ERM's 83C procedures.A total of nine soil borings were installed to a maximum depth of 25 feet bgs using a direct push drill rig. Temporary groundwater monitoring wells were installed in seven of the soil borings. All boreholes were installed in accordance with Alaskan practice standards for soil drilling, monitoring well installation, and equipment decontamination. Soil samples were examined by an ERM field geologist, and observations about the physical characteristics such as texture, color, and odor were recorded on the boring logs, as well as the lab sample depths and depth to groundwater (where applicable). After completion of each borehole, the drilling equipment was cleaned and decontaminated using a high pressure steam washer and de-ionized water rinse. 3.4.2 Soil Sampling Continuous soil sampling was performed at each boring location to describe the soil characteristics and collect soil samples for laboratory analysis.Two soil samples were collected from each boring. If visual observations indicated the potential impacts to surface soils, a shallow soil sample was collected. If there were no indications of potential impacts to shallow soils, a soil sample was collected at or slightly above the groundwater interface (capillary fringe), the most probable zone of impact from contaminant releases to the subsurface. l Figure volatile organic compounds (VOCo). SVOCs,total petroleum hydrocarbons (TPH—GRO/DRO/ORO), meta|o, polychlorinated biphenyls (PCBs), and tributyltin (TBT).A summary of the soil samples is provided in Table 3-1 (Attachment II) All samples were placed in the required laboratory-provided containers, labeled,transferred to a cooler, packed with ice and shipped to ALS Environmental, located in Kelso,Washington,for analyses of VOC, SVOC, TPH -ORO/DRO, Metals, PCBs, and TBT.Attachment V provides the chain-of-custody forms along with the laboratory reports. 3.4.3 Mon0onngKYn0/no/a0ationandGnoundwa/er2umpling Seven temporary monitoring wells were installed in the presumed hydraulically-downgradient areas of potential contaminant sources at the Site (Figure 2). The wells were installed using 2-inch PVC casing to a maximum depth of 25 feet bgs.The well casing was lowered to the bottom of the borehole and the drill casing pulled back to expose the screen to the aquifer formation. All non-disposable sampling equipment was decontaminated before and after sampling each temporary well using the following procedure: (1)wash and rinse equipment with tap water and laboratory-use neutral detergent; (2) rinse with tap water; and (3) rinse again with deionized water. Prior to groundwater sampling,the depth-to-water was measured from the top of the well casing using an electronic water interface probe. Field notes and sampling data sheets are provided in Attachment III. The groundwater samples were collected via low-flow sampling techniques using a peristaltic pump with disposable polyethylene tubing. Field parameters (pH, temperature,dissolved oxygen, oxidation-reduction potential, and electrical conductivity)were collected during purging. Groundwater was purged until field parameter readings stabilized,then a groundwater sample was collected. ERM 9 16 APRIL 2614 All samples were collected in the required bottles, preserved according to the specific analytical method standards, labeled, orj transferred to a cooler, packed with ice and shipped to ALS, located in Kelso,Washington,for analysis of VOCs, SVOCs, TPH GRO/DRO/ORO, metals, PCBs, and TBT. Samples were accompanied by chain-of-custody documentation (Attachment V). A summary of the groundwater samples collected is provided in Table 3-1 (Attachment II) 3.4.4 Surface Water Sampling A total of three surface water samples were collected from the freshwater drainage ditch to the east of the subject property. The samples were collected directly in required bottles using grab sampling techniques. Field parameters (pH,temperature, dissolved oxygen, oxidation-reduction potential, and electrical conductivity)were collected during sampling. Field notes and sampling data sheets are provided in Attachment III. All samples were collected in the required bottles, preserved according to the specific analytical method standards, labeled, transferred to a cooler, packed with ice and shipped to ALS, located in Kelso,Washington, for analysis of VOCs, SVOCs, TPH—GRO/DRO/ORO, metals, and PCBs. Samples were accompanied by chain-of-custody documentation (Attachment V). A summary of the surface water samples collected is provided in Table 3-1 (Attachment II). 3.4.5 Sediment Sampling Continuous coring, using a Vibracore sampler,was performed at each sediment sampling location to describe the sediment characteristics and collect samples for laboratory analysis. Sediment samples were collected on approximately 2-foot increments from four of the coring location (C-1 through C-4). The two upper most samples were submitted for laboratory analysis.The remaining samples were submitted for archiving pending follow up analyses.The entire core from C-5 was composited into a single sample that was submitted for laboratory analysis. Figure 3 presents the sediment coring locations.The core logs are included in Attachment IV.All samples were analyzed for VOCs, SVOCs,TPH—GRO/DRO/ORO, metals, PCBs, and TBT.A summary of the sediment samples is provided in Table 3-2 (Attachment II). Duplicate samples and Matrix Spike and Matrix Spike Duplicate samples were collected for Quality Assurance/Quality Control (QA/QC) purposes, in order to evaluate laboratory performance.ALS used three methods of QC,which are analysis of surrogate spike compounds, matrix spikes, and laboratory method blanks. In general,the results of the QC samples obtained by the application of the surrogate spike compound, matrix spike, and method blank laboratory analysis methods were considered satisfactory, and within the acceptable limits of the methods.A data validation of the laboratory results was performed using the QA/QC samples (Attachment V). 3.5 Investigation-Derived Waste Management Investigation-derived waste (IDW) including plastic, cardboard, soil, and groundwater were generated during the completion of the Phase II effort. This material was managed by ERM in accordance with all applicable laws and Vigor policy and procedures. At present, generated wastes are being stored in steel drums pending appropriate off-site disposal,which must be coordinated with the Site owner and Vigor. ERM 10 16 APRIL 2014 4. Findings & Results 4.1 Regulatory Framework The ADEC has established rules and regulations regarding the management of releases to the environment of oil and hazardous substances under 18 RAC 75.This includes established risk-based cleanup targets for soil and groundwater.The cleanup levels used for screening purposes in this investigation were based on the likely exposure scenarios at the oita, consisting of direct oontod, ingesUon,and migration to groundwater.The Site receives an average of over 68 inches of rainfall annually and therefore the"over 40-inches of rainfall"cleanup levels were used to compare the results to direct contact and ingestion exposure criteria. AEDC has established risk-based water quality standards under 18 AAC 70 for evaluating risk to receptors via multiple surface water exposure pathways. For the purpose of this investigation,the only applicable surface water risk exposure pathway was assumed to be risk to aquatic life. In the instances where there is no surface water criteria established,the groundwater cleanup level is used for screening purposes. AEDC has not established state-specific screening values or cleanup levels for sediments. However, per the AEDC technical memorandum on Sediment Quality Guidelines (SQGs),dated January 2013, both 18 AAC 70 and 1OAAC75"provide aclear expectation that parties responsible for contaminated site must include consideration of contaminated sediment m the assessment and cleanup process." The recommended method for evaluating sediment quality is to screen sediment data against statistically derived Threshold Effects Level (TEL)and the Probable Effects Level(PEL). The TEL is the concentration below which adverse effects to benthic receptors are expected to occur rarely.The PEL is the concentration above which adverse effects are frequently expected. 4.2 Field Observations 4.2.1 Soils Soils throughout the subject property consist of sand and Qxovo}o,with some silty sand layers. Shallow soil included some sandy gravel fill material that appeared to be reworked native material. Some areas of black sand, indicative of sand blast grit,were also observed.No field indications of contaminant impacts(e.g., sheen, staining,or odors)were observed. 4.2.2 Groundwater Groundwater in the temporary monitoring wells was observed between 16 and 20 feet bgs.The groundwater level is likely to be tidally influenced. Tides in Resurrection Bay during the field work period were predicted to fluctuate up to 12 feet. No indication of non-aqueous phase liquid(NAPL), xtaining, odom,or evidence of impact was noted in relation to groundwater. 4.2.3 Surface Water No indication of sheen, NAPL, ataining,odum, or evidence of impact was noted in relation to surface water. ERM 11 m APRIL zo,^ 4.2.4 Sediment Sediment in the area adjacent to the subject property consists of silt and silty sands,with occasional gravel layers. Shallow sediment(0 to 1-foot below mudline) contained some metal fragments, debris, and organics. Some indications of impacts, including black sand, and a slight oily sheen were observed in cores adjacent to the SyncroLift. 4.3 Soil Sample Analysis Results A total of nine soil samples representing the nine sample locations were analyzed.The laboratory reports are presented in Attachment V.Tables 4-1 and 4-2 (Attachment II) present the summary of soil analytical results. Complete soil analytical results are provided in the laboratory reports(Attachment V). No VOC, SVOC, TPH—GRO/DRO/ORO, PCBs, or TBT concentrations were detected at concentrations exceeding the reference standards in soil samples. The metals arsenic and chromium were detected in soil samples above the ADEC Method 2 screening level for migration to groundwater. Exceedances were within previously accepted background levels of 9.8 milligrams per kilogram(mg/kg) and 34.8 mg/kg respectively(E&E 2007). 4.4 Groundwater Analysis Results The physical chemical parameters (pH,temperature, and electrical conductivity)were measured during groundwater sampling and found to be within the typical range for groundwater. Table 4-3 (Attachment II) presents a summary of the field parameters measured on site during groundwater sampling activities. Table 4-3 (Attachment II) presents a summary of groundwater analytical results. Complete groundwater analytical results are provided in the laboratory reports (Attachment V). No TPH—GRO/DRO/ORO, TBT, or SVOCs were detected in any groundwater samples. Chloroform, methyl chloride,and toluene were detected at concentrations below the groundwater cleanup levels. Metals were detected in all the groundwater samples analyzed for total metals. Concentrations were below the groundwater cleanup levels,with the exception of lead in BH-01 and BH-06.Visual observations of these samples indicated that turbidity was elevated and had some solids entrained in the sample. These exceedances are likely due to naturally-occurring lead in soil that was entrained in the sample. 4.5 Surface Water Analysis Results The physical chemical parameters (pH, temperature, and electrical conductivity)were measured during surface water sampling and found to be within the typical range for surface water. Table 4-4 (Attachment II) presents a summary of the field parameters measured on site during surface water sampling activities. Table 4-4 (Attachment II) presents a summary of surface water analytical results. Complete surface water analytical results are provided in the laboratory reports (Attachment V). No PCBs or TPH—GRO were detected in the surface water samples.TPH—DRO/ORO and SVOCs were detected at low concentrations that are below the freshwater aquatic life criteria for surface water.Acetone; 1,2,4-Trimethylbenzene; m,p-xylenes; o-xylene; naphthalene; and toluene were in detected at concentrations below the freshwater aquatic life criteria in one or more of the surface water samples. Methylene chloride was detected in the upstream sample (SW-01) at a concentration of 5.2 ug/L,which exceeded the applicable screening level (groundwater cleanup level)of 5 ug/L. Methylene chloride is a ERM 12 16 APRIL 2014 solvent commonly used in analytical laboratories and was detected in the laboratory method blank and trip blank samples. It is likely that this exceedance is due to laboratory contamination. 4.6 Sediment Analysis Results A total of nine sediment samples representing the five coring locations were analyzed. The laboratory reports are presented in Attachment V. Table 4-5 (Attachment II) presents the summary of sediment analytical results. Complete sediment analytical results are provided in the laboratory reports (Attachment V). Sediment sampling results were screened against the TELo. PELs. and the Dutch Intervention values respectively. All VOC, TPH—GRO/DRO/ORO, and PCB concentrations in sediment were non-detect or below the TELs. Metals were detected in all sediment samples at concentrations below the TEL, with the exception of copper. Copper was detected in all the sediment samples at concentrations above the TEL, but below the PEL. Concentrations of copper in sediment were similar to copper concentrations in upland soil and previously accepted background soil samples (E&E 2007). PAHs were detected in all the sediment samples at concentrations above the TEL in one or more samples. Only one sample, the OD'toV.54uot sample from C'1 had concentrations of PAHs above the respective PELs for acenaphthene, fluoranthene, and pyrene. Exceedance factors of these detections were less than two times the PEL.The concentrations of all other PAHs were below the PELs. PAH concentrations in the underlying sediment sample interval (C-1-1-2, collected from 1 to 2-feet below mudline)were either non-detect or below the TEL. TBT was detected at low to moderate levels in all the sediment saMples, except for C-1-1-2 and C-2-0-2. There are no bulk sediment screening level values for TBT in marine sediments. The porewater screening level value for TBT in marine sediment is 0.15 ug/L. For reference the freshwater bulk sediment screening level value for TBT is 75 ug/kg. ERM 13 16 APRIL 2014 5. Summary and Conclusions ERM was commissioned by Vigor to undertake a Phase II ESA at the Seward Ships Drydock facility located at the Seward Marine Industrial Complex, 7-Mile Nash Road, Seward,Alaska.This report documents the Phase II investigation and assessment of the conditions of soil, groundwater, surface water, and sediment. A draft Phase 1 assessment was completed by ERM at the Site in January 2014.Vigor is considering purchasing the Site as part of a potential transaction referred to as Project Solstice. Based on the evaluation of analytical results and field data gathered during the Phase II ESA, the following conclusions are provided: • The Site geology generally consists of sand and gravels,with some silty sand layers. Shallow soil included some that consisted of sandy gravel fill material that appeared to be reworked native material. • Groundwater is approximately 16 to 20 feet bgs. • No field indications of contaminant impacts to soil or groundwater(e.g. sheen, staining,or odors)were observed. • The soil analytical results showed no concentrations of VOC, SVOC,TPH-GRO/DRO/ORO, metals, PCBs, or TBT above the soil screening levels or background concentrations. • Groundwater analytical results showed no concentrations that were above the groundwater cleanup levels or background levels. • Surface water analytical results showed all concentrations were below the freshwater aquatic life criteria, or were due to laboratory contamination.These results also indicated that surface water quality does not change significantly from upstream to downstream of the site. • Sediment analytical results indicated that TBT and metals are present in sediment in the vicinity of the SyncroLift, at concentrations that are below applicable screening level values. • Sediment analytical results indicate that PAHs are present at concentrations above the PELs in the vicinity of the SyncroLift. These elevated concentrations are limited to the shallow sediment(0 to 1-foot below mudline). ERM 14 16 APRIL 2014 ���, References A�akmDepo�mertofEn�mnman�|ConaomoUwn �QEC). 2013.ADECDoo��nDooument Seward Sh��Dqxdock C�unupComple/eDoAennivation. March 2013. ASTM International (ASTM) Standard E 1903-97 Standard Guide for Environmental Site Assessments:Phase II Environmental Site Assessment Process. ASTM 201 1. Ecology and Environment, Inc. (E&E). 2007. Seward Ship's Dry Dock Site Inspection, Seward, Alaska. September 2007. Geological Survey Professional Paper 542'E.Effects of the Earthquake o/Marc h2� 1904' at Seward, Alaska. To||uodd. 2OO8a. �e/d3umma,yRopo�for Spent Sandblast Me�aChooacton�u�on &D�puoa/PmQmm. Seward Ship's Dgx�c� Incorporated, �ewun� Alaska. February 2009. Tellus Ltd.2009b. Field Summary Report for Solvent Storage Area Characterization Activities, Seward Ship's Drydock, Incorporated, Seward, Alaska.March 2009. TeUuo Ltd.2UO9o. Interim Field Summary Report for C6eanup' /nven�Qa�onQ8daCham*o/enzo�onPmDmm. Seward Ship's D�dook6nco/poraA*� Sowen± Alaska. September 2OUg USGS 1981.Hydrologic Reconnaissance Near Fourth Of July Creek, Seward, Alaska. ERM 15 ,o APRIL 20w 4ial■ 7. Statement of Conformance « , ����� ��o ����onn�������� _- ----_ with ASTM E1903-11 We have performed a Phase U ESA at the property at the Seward Ships Drydock facility located at the Seward Marine Industrial Complex, 7-Mile Nash Road, Seward,Alaska, in conformance with the scope and limitations of ASTM Practice E 1903-11 and for the following objectives:"The objectives of the Phase II investigation are to characterize sediment, surface water, and subsurface soil and groundwater conditions in areas where recognized environmental conditions were identified during completion of the Phase I ESA and to help determine if any potential environmental liabilities are associated with those Site conditions'developed pursuant to Section 3.2 of this report. 47"0,9 emi Brendan A. Robinson, P.E. Senior Engineer Erik C. Iomeo, ]P.E Partner snm 16 16 APRIL 2014 Attachment Figures k 4 L ERM 16 APRIL 2014 .. 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