HomeMy WebLinkAboutRes1988-084
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Sponsored by: Schaefermeyer
CITY OF SEWARD, ALASKA
RESOLUTION NO. 88-084
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SEWARD, ALASKA, APPROVING A LEASE AGREEMENT WITH
JAMES PRUITT, DBA SEWARD SHIPS CHANDLERY
WHEREAS, the city of Seward has constructed on ci ty-
owned land at the Seward Marine Industrial Center a ship-
lift, ship transfer and rails system; and
WHEREAS, the public interest would be served by the
development thereon of ship repair and construction busi-
nesses which would provide employment for residents of the
city of Seward and expansion of the port of Seward as a ship
repair and construction port; and
WHEREAS, the city has requested proposals from inter-
ested parties for the lease of all or a part of the Seward
Marine Industrial Center; and
WHEREAS, James Pruitt, dba Seward Ships Chandlery,
(Lessee) submitted a proposal which has been reviewed by the
City Council; and
WHEREAS, the city and the Lessee have concluded
negotiations for the lease of the facilities; and
WHEREAS, the City Council finds that an appraisal
of the property would not be in the public interest in that
the lease agreement provides for private capital investment
and employment which are important benefits to the public
interest in the early years of the lease, and for a fair
market value rental based on appraisal in the later years;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF
THE CITY OF SEWARD, ALASKA, that:
Section 1. The city manager is authorized and directed
to execute that certain lease agreement in substantially the
form of that attached to this resolution.
Section 2. An appraisal of the property to be leased
is not in the public interest.
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 22 day of August , 1988
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CITY OF SEWARD, ALASKA
RESOLUTION NO. 88-084
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
THE CITY OF SEWARD, ALASKA
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e.~
HA Y . GIESELER, MAYOR
DUNHAM, GIESELER, HILTON, MEEHAN, NOLL, O'BRIEN & SIMUTIS
NONE
NONE
NONE
APPROVED AS TO FORM:
HUGHES, THORSNESS, GANTZ,
POWELL & BRUNDIN, Attorneys
for the City of Seward, AK
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(City Seal)
% J7jl~
Fred B. Arvidson
City Attorney
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Article 1
Article 2
Article 3
Article 4
Article 5
Article 6
Article 7
Article 8
Article 9
Article 10
Article 11
Article 12
Article 13
Article 14
Article 15
Article 16
Article 17
Article 18
Article 19
Article 20
Article 21
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SEWARD SHIP'S CHANDLERY LEASE
August, 1988
TABLE OF CONTENTS
Page
Leased Land .. . ... 3
utilities and Rights of Access 6
Lease Term . . . 10
Construction by Lessee 13
Rent. . ... . 15
Permanent Employee Obligation 17
Use of Leased Land. 18
Force Majeure .. 29
Lessee's Acts of Default 29
Remedies for Lessee's Acts of Default 32
City Acts of Default . . . 34
Remedies of City's Acts of Default. 35
Title to Improvements Installed by Lessee 37
Sublease or Assignment 39
Indemnification 41
Insurance 41
Condemnation 44
Arbitration 46
Maintenance and Repairs 48
Fire Protection . . . 52
Estoppel Certificate. 52
Article 22 Conditions and Covenants. 53
Article 23 No Waiver of Breach 53
Article 24 Time of the Essence 53
Article 25 Computation of Time 53
Article 26 Successors in Interest. 54
Article 27 Entire Agreement. 54
Article 28 Governing Law . 54
Article 29 Partial Invalidity. 54
Article 30 Relationship of the Parties 54
Article 31 Interpretation. 55
Article 32 Number and Gender 55
Article 33 Mandatory and Permissive. 55
Article 34 Captions. 55
Article 35 Amendment 55
Article 36 Delivery of Notices - Method and Time 56
Article 37 Notices . . . 56
Article 38 Change of Address 56
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LEASE AGREEMENT
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This Agreement made and entered into effective
thirty-one (31) days after the passage and filing of Resolution
88-___ approving this Lease Agreement between the CITY OF
SEWARD, a municipal corporation located in the Kenai Peninsula
Borough, State of Alaska, hereinafter referred to as "CITY" and
JAMES T. PRUITT d/b/a Seward Ship's Chandlery, hereinafter
referred to as "LESSEE".
WHEREAS, CITY has agreed to lease to LESSEE and LESSEE
has agreed to lease from CITY 1.76 acres, more or less, of
properties within the boundary limits of the City of Seward,
Alaska, hereinafter referred to as the "Leased Land"; and
WHEREAS, CITY has invested substantial public monies in
the construction of public port facilities adjacent to and on
the Leased Land in order to provide opportunities for the
development of a ship repair and construction industry in the
City; and
WHEREAS, the City Council of the City of Seward has
determined that a lease of the Leased Land and construction and
operation thereon of a vessel repair and construction facility
would be in the public interest in that such a facility would be
compatible with the public's use of the public port facilities
and the success of that operation would provide employment for
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Seward Ship's Chandlery Lease
Page 1
the residents of the City of Seward, and promote the growth and
stability of the economy of Seward all as set forth more fully
in Resolution 88- adopted by the City Council of the City of
Seward, Alaska; and
WHEREAS, LESSEE will offer comprehensive marine repair
services, including but not limited to, steel and other metal
work, marine pipe fitting, marine electrical repair, waste
handling, sand blasting, painting, and other marine services and
LESSEE will be capable of handling vessels up to 300 feet in
length in an enclosed facility; and
WHEREAS, LESSEE has agreed to make substantial private
investment in facilities on the Leased Land and to permanently
employ in its operations on the Leased Land a substantial number
of residents of the City of Seward, Alaska, and to offer to the
public a full-service marine repair facility; and
WHEREAS, LESSEE's proposal to construct and operate a
vessel repair and construction facility is contingent on
LESSEE's reasonable access to a ship repair station capable of
accommodating vessels of up to 300 feet in length; and
WHEREAS, LESSEE contemplates the construction and
operation of a small metal foundry and small hot dip galvanizing
plant;
NOW THEREFORE, for and in consideration of the mutual
promises and covenants hereinafter contained, the parties hereto
agree as follows:
Seward Ship's Chandlery Lease
Page 2
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ARTICLE 1.--LEASED LAND.
1.1--Leased Land. That certain portion of land
situated in the fractional Section 18 TIS, RIE of the Seward
Meridian, Third Judicial District, State of Alaska, and more
particularly described on the attached Exhibit A and outlined In
red thereon which is incorporated herein by reference.
1.2--Survey of Leased Land. Within thirty (30)
days from the date of this lease agreement, LESSEE shall retain
a professional registered land surveyor who will conduct a
survey of the leased land for the purpose of preparing a legal
description of the leased land. The description of the land thus
prepared shall be attached to this lease agreement as Exhibit B
and shall be incorporated herein by reference. The Lessor and
City shall evenly split the cost of that survey; any other
survey work (such as as-built surveys, engineering and survey
work for permits or other governmental requirements) shall be at
the sole cost and expense of Lessee. That new description shall
be considered the correct description of the
leased land for all purposes under this lease agreement. The
intent of the parties in providing for an interim description of
the leased land on Exhibit A is to sufficiently identify the
leased land for purposes of public hearing and approval of the
lease agreement by the City Council of the City of Seward, and
further, to enable LESSEE to have immediate access to the leased
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Seward Ship's Chandlery Lease
Page 3
land for commencement of construction and site preparation.
1.3--Platting. CITY and LESSEE shall prepare and
file for submission and approval a re-plat (which re-plat shall
be acceptable to LESSEE, who's approval shall not unreasonably
be withheld) of the Seward Marine Industrial Center, identifying
the Leased Land as a separate parcel.
1.4--Covenant of Quiet Enjoyment. Subject only to
restrictions of title or provisions of this lease, CITY hereby
covenants that LESSEE shall have the quiet enjoyment and
possession of the leased land for the uses authorized hereunder
for the full term of this lease. CITY owns the leased land free
and clear of all encumbrances and is fully empowered to enter
into this lease. CITY is unaware of any prior conflicting use
of the property which would adversely affect LESSEE's intended
use of the property.
1.5--Right of First Refusal. In recognition of
LESSEE's interest in expansion of its operations beyond the
Leased Land, and as further inducement to LESSEE to enter into
this lease agreement, CITY hereby grants to LESSEE the right to
meet or exceed any offer by a third party to lease the City land
within that outlined in GREEN on Exhibit A and not included in
this lease in accordance with the following provisions:
a) Option period. This right to lease may only
be exercised by LESSEE during the first five (5) years of this
Agreement, that is to say, on or before September 30, 1993.
Seward Ship's Chandlery Lease
Page 4
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b) Lease in good standing. The right may only be
exercised by LESSEE if LESSEE is not in default under any terms
of this lease agreement, has performed in a timely manner all
obligations to be performed by LESSEE, and has not transferred
or assigned any of LESSEE's interest in this lease agreement to
any party without CITY's prior written permission having been
obtained by LESSEE. This right to lease additional land is
intended to provide LESSEE with expansion opportunities and not
to allow LESSEE to speculate or otherwise benefit from any
increase in the value of the land subject to this option.
c) Exercise option. If CITY receives a bona fide
offer to lease or purchase the land subject to this ARTICLE and
if the City Council finds that such a lease or purchase would be
in the public interest, then LESSEE shall have a period of
thirty (30) days from the date of the passage of the Resolution
of the City Council of the City of Seward making such a
determination to exercise its right to either lease or purchase
the land on the same terms and conditions as those contained in
the offer to lease or the purchase agreement approved by the
City Council. LESSEE's failure to exercise this right within
the time period designated shall operate to terminate all of
LESSEE's rights hereunder to lease the land (or purchase it if
the third party offer was an offer to purchase).
d) Intent. The intent of this provision is to
provide for additional expansion room for LESSEE without
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Seward Ship's Chandlery Lease
Page 5
20#
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restricting CITY from seeking development of that land from
other parties. The partieJ recognize that, exce~t for t~e
ob1j,?"ti.r:'::J "~i1:::C".nf'j i." th:;'~ lJars agceelr~nt, LESSEE !oneIl,
during the option period, not be required to pay any additonal
considera~iJn fa, the righ~ co~t~ined in this ARTICLE.
ARTICLE 2.--UTILITIES AND RIGHTS OF ACCESS.
In addition to the rights of possession and use
conferred herein upon LESSEE to the Leased Land, CITY warrants
that LESSEE shall have all rights of access to and egress from
the Leased Land necessary to construct and operate LESSEE's
facilitip,s including any ~asements necessary for access to
~ublic streets. LESSEE has reviewed the plans, specifications,
and actual improvement~ made to the public port facilities at
the Seward Marine Industrial Center, including those listed
below, and has independently determined that they are sufficient
for LESSEE's intended uses of the Leased Land.
2.1--Electrical. CITY will provide electrical
service consisting of ptimary commercial service of 750 KVA to
the location marked in YELLOW on the attached Exhibit A, which
nas been agreed by the parties as an accept~ble service
location. All ~oscs associated with electrical ~ervice beyond
that point to ~ESSEE's facilities and im~rovements are at the
sole cost and expens~ of LESSEE,
2.2--Sewer. LESS~~ shall, at its sole expense,
conner.~ to the existing p.blic sewer facilities. CITY shall
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Sew~rd Ship'S Ch3ndlery Lease
page 6
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have no obligation to expand or upgrade the existing sewer to
accommodate Lessee's uses of the Leased Land, CITY being
obligated only to provide sanitary sewer sufficient for use by
employees of LESSEE and employees of tended vessels. CITY shall
have no responsibility to provide special treatment or handling
facilities for industrial waste, waste oil products, bunker oil
or contaminated water of any type associated with a vessel
repair and construction facility or metal foundry or galvanizing
plant including all waste petroleum and chemicals.
2.3--Water. By October 1, 1988, CITY shall
provide potable water to the approximate location marked in BLUE
on the attached Exhibit A with a minimum service of a 6 inch
line.
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2.4.--Petitions for Zoning. In the event that at
any time LESSEE deems it necessary or appropriate to obtain use,
zoning or subdivision and precise plan approval and permits for
the Leased Land, or any part thereof, CITY agrees from time to
time upon request of LESSEE to execute such documents,
petitions, applications and authorizations as may be appropriate
or required to obtain conditional use permits, zoning and
re-zoning, tentative and final tract approval and precise plan
approval.
At the request of LESSEE, CITY shall, from time to
time, execute and deliver or join in execution and delivery of
such documents as are appropriate, necessary or required to
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Seward Ship's Chandlery Lease
Page 7
impose upon the Leased Land covenants, conditions and
restrictions providing for the granting of exclusive uses of the
Leased Land, or any part thereof, the establishment of party
walls, the establishment of mutual and reciprocal parking rights
or rights of ingress or egress, or other like matters, all of
which are for the purpose of the orderly development of the
Leased Land as a commercial unit subject, however, to the
conditions that:
a) All such matters shall be limited to the lease
term and shall terminate upon termination of the lease for
whatever reason.
b) Any such matters of a permanent nature
extending beyond the lease term shall not be granted without the
prior written approval of CITY. In any of the foregoing
instances referred to in this paragraph, CITY shall be without
expense therefore, and the cost and expense thereof shall be
borne solely by LESSEE.
c) At the expiration of the lease term (including
any extended period) and subject to the provisions of ARTICLE 13
(Title to Improvements Installed by LESSEE) all buildings and
equipment on the Leased Land other than portable equipment shall
become the property of CITY upon the payment of the compensation
specified in ARTICLE 13, or LESSEE shall remove all buildings
and equipment at CITY's option.
d) If, despite best efforts LESSEE is unable to
Seward Ship's Chandlery Lease
Page 8
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obtain, as required, variances to meet current zoning
restrictions, including height or setback, by December 31, 1988,
LESSEE may terminate this lease without further obligation.
2.5--Future Easements. In order to provide for
the more orderly development of the Leased Land and adjacent
lands including publicly owned facilities at the Seward Marine
Industrial Center, it may be necessary, desirable or required
that street, water, sewer, drainage, gas, power line and other
easements and dedications and similar rights be granted or
dedicated over or within portions of the Leased Land. As
additional consideration for this lease, both CITY and LESSEE
shall, at the request of the other, join with each other in
executing and delivering such documents from time to time and
throughout the lease term as may be appropriate, necessary, or
required by the several governmental agencies, including the
City of Seward, pUblic utilities and other users or tenants of
the Seward Marine Industrial Center for the purpose of granting
such easements and dedications. The costs of relocating any
public easements or restrictions of record including any
relocation of public road, utility, or other easement 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 Seward Marine Industrial
Center. Any easements or rights of access granted to LESSEE by
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Seward Ship's Chandlery Lease
Page 9
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
reasonable use of the Leased Land by LESSEE.
ARTICLE 3.--LEASE TERM.
This lease shall commence thirty-one (31) days after
Resolution 88-___ has been approved by the City Council of the
City of Seward and filed with the City Clerk. The term of this
lease shall be as follows:
3.1--Phase One Construction Term. From and after
the commencement date of this lease agreement (in.other words,
thirty-one (31) days from the date of approval of Resolution
88- by the City Council and filing thereof with the City
Clerk) until August 31, 1989, LESSEE shall be required to have
accomplished the following:
a) have in place on the Leased Land a
shiplift cradle system capable of loading and transferring two
hundred (200) foot vessels and three hundred (300) foot barges
on the City shiplift including adjustable bilge blocks.
b) Lessee has been actively seeking and
performing ship repair work on the cradle referenced in
subparagraph (a) above.
3.2--Phase Two Construction Term. The Phase Two
Construction Term of this Lease Agreement shall continue until
August 31, 1991, and may begin at any time during which time
Seward Ship's Chandlery Lease
Page 10
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LESSEE shall be required to construct and complete a permanent
covered repair building capable of fUlly enclosing a vessel of
three hundred (300) feet in length.
3.3--Failure to Construct/Operate. If CITY and
LESSEE cannot agree as to whether LESSEE has complied with the
terms of the provisions of Sections 3.1 and 3.2 of this lease,
then the parties agree to submit the dispute to arbitration in
accordance with ARTICLE 18 of this lease, but LESSEE shall have
no right to occupy or lease the Leased Land except as provided
in Section 3.4 of this lease. If the final decision determines
that LESSEE had, in fact, complied with the requirements of
Sections 3.1 and/or Section 3.2 above, then LESSEE shall be
entitled to re-take possession of the leased premises and
continue under the terms of the Lease Agreement. However,
LESSEE shall not be entitled to any recovery against CITY for
interruption of the lease unless the arbitration panel shall
find that CITY committed fraud in asserting LESSEE had not
complied with the provisions of Section 3.1 and/or Section 3.2
above. The intent of this provision is to place the risk of
compliance with those sections of the lease solely on LESSEE and
to preclude any recovery by LESSEE for any termination of this
lease by reason of LESSEE's failure to comply except for fraud
by CITY.
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The provisions of this Lease Agreement providing for
extensions of time for performance shall NOT apply to the
Seward Ship's Chandlery Lease
Page 11
requirements of Sections 3.1 and 3.2 of this lease. It is the
intent of the parties to require the compliance of LESSEE with
Sections 3.1 and 3.2 without regard to any contingencies,
interruptions, delays, or any other excuses, force majeure, or
other reasons for delay, however reasonable those reasons might
be. In short, the intent of the parties, and a primary
consideration for CITY to enter into this lease is the
unconditional, absolute, unqualified, non-waivable,
non-excusable obligation and covenant of LESSEE to satisfy the
requirements of Sections 3.1 and 3.2 of this lease.
3.4--Possession During Arbitration. If either
party submits a dispute under Section 3.3 to arbitration, the
arbitration panel shall be required to render a final decision
within four (4) months of the submittal to arbitration, and then
LESSEE shall have the right to remain in possession of the
leased property for that period of four (4) months from the date
the party desiring arbitration shall give written notice to that
effect to the other party. During the four (4) month period,
LESSEE's possession of the leased premises shall be governed by
the terms and conditions of this lease, and for the right to
possession of the Leased Land during this period LESSEE shall
pay rent equal to that specified in ARTICLE 5 of this lease.
LESSEE may remain in possession beyond the four (4) month period
provided herein for the arbitrators to render a decision only if
that decision is delayed by reason of the arbitrators' or CITY's
Seward Ship's Chandlery Lease
Page 12
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delay and is not the result of any action or inaction by the
LESSEE. In order for LESSEE to be entitled to hold over in
possession beyond the four (4) months the arbitrators must find,
before the expiration of the four (4) months, that the delay is
not caused by LESSEE. Acceptance by CITY of rent and other
amounts due CITY during this four (4) month period shall not
constitute a waiver of any breach of any term, covenant or
condition of the lease, including the termination provisions in
Sections 3.1, 3.2 and 3.3 of this lease. At the conclusion of
the four (4) month period of possession LESSEE shall vacate and
surrender possession of the premises to CITY without any further
action or notice by CITY.
3.5--Primary Term. The primary term of this lease
shall commence on September 1, 1991, and continue through
December 31, 2008.
ARTICLE 4.--CONSTRUCTION BY LESSEE.
4.1--Construction. LESSEE shall have the right
(subject to any necessary approvals by governmental bodies or
agencies) to erect, maintain, alter, remodel, reconstruct,
rebuild, build and/or replace buildings and other improvements
on the Leased Land, subject to the following conditions:
a) The cost of any such construction,
reconstruction, demolition, or of any changes, alterations or
improvements, shall be borne and paid for by LESSEE.
b) The Leased Land shall at all times be kept
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Seward Ship's Chandlery Lease
Page 13
free of mechanics and materialmen's liens.
c) LESSEE shall comply with all building code
requirements and shall supply CITY with a copy of all building
plans and specifications and a site plan or plans for the Leased
Land.
d) Any general contractor employed by LESSEE
or its sub-lessees shall be appropriately bonded by use of
performance and labor and material payment bonds in the
customary form when cost of the work is over $20,000. Copies of
all such bonds shall be furnished to CITY prior to commencement
of construction. LESSEE shall provide CITY, if no performance
and labor and material bonds are provided by LESSEE, any
necessary assurance or guarantees that the contemplated work
will be performed by the general contractor or by LESSEE.
LESSEE has the right to bond any lien in accordance with
AS 35.34.
e) CITY may, as contemplated by Alaska
Statutes, give notice of non-responsibility for any improvements
constructed or effected by LESSEE on the Leased Land.
f) As to future alterations or improvements
other than those directly related to and necessary for ship
repair and construction a finding by the City Council of the
City of Seward that such action is in the public interest.
4.2--Lease Term Expiration. At the expiration of
the lease term and subject to the provisions of ARTICLE 13, all
Seward Ship's Chandlery Lease
Page 14
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buildings on the Leased Land shall, at CITY's sole option,
become the property of CITY upon the payment of the compensation
specified in ARTICLE 13, or shall be removed at LESSEE's sole
expense. Until the expiration of such lease term, title to and
ownership of all buildings and improvements shall be in the name
of LESSEE.
4.4--Proqress Reports. LESSEE shall provide CITY
with monthly written reports not later than ten (10) days
following the close of the calendar month detailing LESSEE's
progress on its obligations under Sections 3.1 and 3.2 of this
Lease Agreement.
ARTICLE 5.--RENT.
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5.1--Initial Rental Rate. From the effective date
of this lease until September 30, 1990, LESSEE shall be charged
no rent. On October 1, 1990, the rent shall be payable
quarterly in advance on or before the first day of the first
month of each quarter. The anniversary date shall be thirty
(30) days following the approval of this Lease Agreement by the
City Council of the City of Seward.
5.2--Rental Adjustments. Not more than ninety
(90) days before the second anniversary date of the lease, (that
is, thirty-one (31) days after the approval by the City Council
of the City of Seward of Resolution 88- of this lease and the
filing thereof with the City Clerk) and once each five years
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thereafter, the annual rental due and payable shall be adjusted
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Seward Ship's Chandlery Lease
Page 15
to the fair market rental value of the Leased Land as a marine
vessel construction/repair and marine industrial facility,
exclusive of improvements placed thereon by LESSEE but INCLUSIVE
of all improvements made by CITY (including those made before
this Lease Agreement or subsequent). Fair market rental value
shall be determined by appraisal, to be conducted by CITY at its
own expense. The appraiser selected by CITY shall be an
independent MAI certified appraiser. The rental adjustment
shall, unless challenged as hereinafter provided, become final
thirty (30) days following the date a copy of the appraisal
report is delivered or mailed to LESSEE. Except for the initial
rental adjustment, no rental adjustment may exceed thirty-five
percent (35%) of the rental rate then in effect immediately
prior to the adjustment.
If LESSEE does Object to the appraisal rental
rate, it shall give CITY written notice of the Objection within
thirty (30) days following CITY's delivery or mailing of the
report. LESSEE shall then engage a second independent MAI
certified appraiser at its expenses to make a second appraisal
of the fair market rental value of the Leased Land. Upon
receipt LESSEE shall furnish a copy of the second appraisal
report to CITY.
If the second appraisal report reflects a fair
market value rental which varies form the first appraisal by no
more than fifteen percent (15%), then the new rental rate shall
Seward Ship's Chandlery Lease
Page 16
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be the average of the first and second appraisal reports. If
the second appraisal reflects a fair market value rental which
varies from the first appraisal by more than fifteen percent
(15%), then, unless CITY and LESSEE agree on a rate among
themselves, the new rental rate shall be determined in
accordance with the arbitration provisions contained in
ARTICLE 17.
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LESSEE's objection to the rental rate and
engagement of a second appraiser shall not postpone LESSEE's
obligation to pay annual rent at the rate then in effect prior
to any rental adjustment. The new rental rate, when determined,
shall be effective on the fifth anniversary date, or on a
subsequent fifth anniversary date as the case may be. Any
deficiency in the payment of rent existing when the new rental
rate is determined shall be paid by LESSEE within forty-five
(45) days. Any overpayment of rent shall be returned by CITY to
LESSEE within forty-five (45) days of the determination of the
new rental rate.
ARTICLE 6.--PERMANENT EMPLOYEE OBLIGATION.
As set forth in Resolution 88- one of the primary
reasons for the approval of this Lease Agreement is LESSEE's
intention to employ Seward residents in full-time, year round
vessel repair and construction work. LESSEE agrees to use best
efforts to provide full-time year round employment for at least
ten (10) employees or full time equivalent. The term "employee"
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Seward Ship's Chandlery Lease
Page 17
and "full-time equivalent" means an individual or individuals
employed on an average over a ninety (90) day period of at least
thirty two (32) hours per week at the Leased Land for LESSEE on
projects and work of LESSEE conducted at the Leased Land. The
City shall have the right to verify LESSEE's compliance with the
provisions of this ARTICLE by being provided quarterly certified
and sworn payroll records of LESSEE of employees employed at the
Leased Land.
ARTICLE 7.--USE OF LEASED LAND.
7.1--Risk to Adjacent Facilities. LESSEE will
only use the Leased Land for ship repair/construction activities
and purposes incidental thereto. LESSEE will not use the land
in any manner or construct any facilities thereon which would
inhibit the use of adjacent or other lands at the Seward Marine
Industrial Center. The parties agree that the Leased Land is
one of few parcels within the Seward Marine Industrial Center
suitable for ship repair/construction activities and that the
City of Seward has made a substantial investment in public
facilities adjacent or in proximity to the Leased Land with the
objective of providing opportunities for businesses such as
LESSEE to operate.
7.2--Customer Satisfaction. a) CITY and LESSEE
recognize that it is important to the successful development and
operation of the Seward Marine Industrial Center that all
vessel repair and construction work of LESSEE be performed in a
Seward Ship's Chandlery Lease
Page 18
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workmanlike fashion and in conformity with normal standards of
quality customarily acceptable within the vessel repair/-
construction industry, and in a timely fashion.
b) Lessee and CITY agree to jointly prepare
and LESSEE will submit to each customer of LESSEE at the
completion of the particular repair and/or construction activity
performed on the Leased Land or the public port facilities a
questionnaire seeking the customer's opinion of the quality,
workmanship and timeliness of the services performed by LESSEE.
Completed questionnaire forms shall be maintained by LESSEE at
the leased land and shall be made available for inspection by
CITY at all reasonable times. In the event a questionnaire is
not completed by a particular customer within 10 days of the
date of the completion of the particular work or project, LESSEE
shall resubmit the questionnaire to the customer by mail in an
effort of obtain a response. If a response is not obtained
within 15 days of the date of mailing of the resubmittal by
LESSEE, LESSEE and CITY shall together contact the customer in
efforts to obtain a completed questionnaire. The objective of
the parties is to obtain, if possible and with reasonable
efforts a 100% level of customer response.
c) Except as stated herein, CITY shall not
contact LESSEE's customers directly for the purpose of
discussion of any work performed by LESSEE without the express
permission of LESSEE. If, on the basis of the questionnaires,
.
.
Seward Ship's Chandlery Lease
Page 19
more than thirty percent (30%) of LESSEE's customers during a
twelve (12) month period express material dissatisfaction with
the quality, workmanship or timeliness of repairs and/or
construction services performed by LESSEE, CITY may at its
discretion and expense retain an independent expert qualified as
an expert in the vessel repair and/or construction field to
investigate and determine whether the work performed by LESSEE
is in fact being conducted and performed in a workmanlike
fashion, and in compliance with acceptable standards of quality
within the industry, and in a timely fashion. The'expert so
retained shall submit a report in writing to CITY with copy to
LESSEE, stating whatever remedial steps, if any, are recommended
as necessary to eliminate deficiencies in quality, workmanship
or timeliness of repairs which the expert deems to exist. The
expert's recommendation, if any, shall include a reasonable time
within which to accomplish the remedial steps recommended in
such report.
Within ten (10) days fOllowing submission of
the expert's report and recommendations, if any, CITY and LESSEE
shall meet to determine whether LESSEE agrees with said
recommendations, and the time limits suggested by the expert for
correction of same. In the event LESSEE and CITY are unable to
mutually agree on a plan to accomplish the expert's
recommendations or the time schedule for accomplishing same,
then LESSEE may, within ten (10) days thereafter, retain its own
Seward Ship's Chandlery Lease
Page 20
.
.
expert who shall also be qualified as an expert in the vessel
repair/construction industry to evaluate and report ~pon the
recommendations provided by CITY's expert and the time schedule
recommended by CITY's expert. LESSEE'S expert shall submit a
written report to LESSEE with a copy to CITY within thirty (30)
days of his being retained, setting forth his own
recommendations as to remedial steps, if any, to be taken,
together with a time schedule for accomplishing same. CITY and
LESSEE shall then meet within ten (10) days of the submission of
said expert's report to consider those recommendations. In the
event LESSEE and CITY are unable to agree as to what, if any
remedial steps or corrective measures should be taken and the
time frame for accomplishing same based on the reports and
recommendations of both experts, then issue of what, if any,
remedial steps and the time frame for accomplishing them shall
be submitted to arbitration under ARTICLE 18 of this Lease
Agreement. In making its determination, the arbitration panel
shall review both experts' reports and recommendations and
determine what, if any, remedial steps and the time frame within
which those steps shall be taken. Failure to comply with the
findings of the Arbitration panel shall be a default under the
terms of this lease agreement.
If LESSEE disputes CITY's selection of an
expert, then it shall promptly, and within ten (10) days of such
selection provide CITY with the names of three independent
.
Seward Ship's Chandlery Lease
Page 21
80~
691808,
0fi:60 t1.-'80
experts well-versed and experienced in ship repair/construction
facilities and CITY may utilize anyone of the three listed by
LESSEE, or in the alternative, CITY may submit the names of two
additional engineers. The parties then shall promptly meet and
mutually a9ree on an acceptable engin~er. If they are unable to
a9ree within five days of the date LESSEE has submitted its
list, then both parties shall promptly and confidentially rank
their cholce of experts in the same manner as that utilized by
the American Arbitration As~ociation to select a single
arbitrator. The expert with the lowest composite score (i.e.,
most preferred or least objectionable) shall be the engineer,"
Despite the rights of CITY to review and require amendments of
changes to LESSEE's operation or construction, CITY shall have
no duty to do so or, upon undertaking such review, to do so in
any particular way. This provision is not intended to create
any ri9hts in any persons or entities that are not parties to
this Agreement, but rather to prOVide CITY with the right to
protect its continued and past investment and its objectives of
promoting the growth and reputation of the Port of Seward and
its operators in the marine industry.
7.3--No p:efe!ential Riqhts to Use Public
Facilities. This lease agreement shall not be construed to
grant any preferential rights of use of any public port
facilities including the syncrolift shiplift, the general cargo
dock, or transfer rail system all located at the Seward Marine
Seward Ship's Chandlery Lease
Page 22
.
Industrial Center, except that a preferential use for those
facilities shall be granted to LESSEE and all other future
tenants of the Seward Marine Industrial Center who are engaged
in vessel repair/construction. Insofar as use of those
facilities is concerned, LESSEE will be sUbject to any
applicable tariffs, procedures, rules and regulations of the
City of Seward as they may now exist or from time to time be
amended and full discretion and control of operation of public
facilities including all docks shall remain totally vested with
the City of Seward Harbormaster according to any rules and
regulations or tariffs in effect from time to time.
7.4--0ther Users of Seward Marine Industrial
Center. This lease agreement shall not preclude the City of
Seward from actively seeking other and additional tenants for
space at the Seward Marine Industrial Center including those who
would be in competition with LESSEE or who might be interested
in leasing the premises leased to LESSEE should this lease be
terminated for any reason.
7.5--0peration by LESSEE. LESSEE shall move all
vessels from the syncrolift shiplift system owned by the City of
Seward to the Leased Land by means of a rail-mounted ship cradle
system and suitable towing system. The cradle and towing system
and rails on the Leased Land must be certified as meeting
acceptable engineering standards for syncrolift/rail loading and
must meet annual Lloyd's registry class rating (Section 4,
.
.
Seward Ship's Chandlery Lease
Page 23
Lloyd's Register of Shipping, 1981-mechanical lift docks) by an
independent surveyor acceptable to Lloyd's prior to any use on
the syncrolift/rail transfer system. 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 leased
premises by LESSEE. The City of Seward may, at its discretion,
refuse access to LESSEE's cradle and/or towing system if the
City of Seward has any reasonable doubt as to the structural
fitness of the cradle system for use on the syncrolift/rail
system. Such refusal shall remain in force until LESSEE
demonstrates to CITY's satisfaction that the cradle is fit for
such use. In the event CITY'S refusal to permit access to
LESSEE'S cradle and/or towing system is found to have been
unreasonable after arbitration of the issue in accordance with
ARTICLE 18 of this Agreement, then CITY shall be liable to
LESSEE for all costs, lost revenues and all other consequential
damages approximately caused by CITY's action.
7.6--Adequacy of Public Facilities. The City
makes no representations or warranties as to any particular part
or the whole of CITY's public facilities with respect to their
fitness for the uses intended by LESSEE, and LESSEE has
inspected those facilities and has examined the plans and
specifications of those facilities under construction and has
Seward Ship's Chandlery Lease
Page 24
.
.
satisfied itself that the design, construction and facilities
are sufficient for the intended uses by LESSEE.
7.7--0peration of Public Port Facilities.
Although CITY presently intends to continue operation of the
syncrolift shiplift system and the ship transfer system and
related public port facilities at the Seward Marine Industrial
Center, it shall have no continuing obligation to do so by
reason of this Lease Agreement except as specifically provided
by this section. CITY may, at any time, modify, reduce, or
expand operations at its sole discretion without thereby
incurring any liability to LESSEE except that CITY agrees to
operate, maintain, and repair the syncrolift shiplift system and
the ship transfer system provided continued operations are
prudent business practice and provided further, that the annual
actual costs of operation exclusive of depreciation and reserves
for replacement are met by the revenues generated from the
applicable tariffs charged to customers of the shiplift system
and ship transfer facilities. If on any annual basis those
direct costs of operation are not met, or if continued operation
would not be prudent business practice, the City Council of the
City of Seward shall have the absolute discretion to determine
if those operations, or a reduction or cessation of those
operations, is in the public interest. Except for the
operational requirement in this paragraph LESSEE shall not be
able to claim by reason of inverse condemnation or other legal
.
Seward Ship's Chandlery Lease
Page 25
theory that the operation of the public port facilities are
required by reason of this lease.
If, as provided above, CITY determines to cease
operating the syncrolift platform and transfer system, it shall
give LESSEE one hundred eighty (180) days notice of that
decision during which time, at LESSEE's request, the parties
will meet and confer with respect to the continuation of
operation. If the parties can reach agreement on transferring
operational control and responsibility of the syncrolift
platform and transfer system, CITY and LESSEE shall reduce that
agreement to writing which shall be sUbject to any then required
approvals of the City Council, or the electors of Seward, or any
regulatory agency. It is the intent of this paragraph to
encourage the parties to provide an agreement on continued
operation of the syncrolift platform and transfer system.
If the syncrolift platform and transfer system are not
operated by CITY for any reason for more than ninety (90) days,
except for interruptions of service due to maintenance, repair,
or other factors beyond CITY's reasonable control, then LESSEE
may terminate this lease but shall not be entitled to claim any
damage thereby including loss of business, revenue or other
damages.
7.8--Tariffs and Other Service Fees. CITY shall
have the right to make amendments to its tariffs, regulations
and scheduled fees from time to time but may not change rates
Seward Ship's Chandlery Lease
Page 26
.
.
.
~0 jO~0#
69t808,
t~:60 tt/8a
more frequently than twice in any twelve month period even if
those adjustments shall cost LESSEE more for its operations or
use of public facilities and CITY is free to do so provided only
that it does not pose any greater burden or higher rate upon
LESSEE than upon any other similar user of the pUblic
facilities. It is further understood that tariffs and scheduled
fees (including lay charqes on the rails and/or at the adjacent
general cargo dock) may be altered from time to time as stated
above and at least initially as a result of this lease, to
assure sufficient user revenue to at least reimburse CITY for
direct cost for operation, maintenance and insurance of the .
public facilities at the Seward Marine Industrial Center
excluding depreciation costs. The parties agree to mutually
develop acceptable tariff rates in proper form for filing with
the Federal Maritime Commission on or before October 1, 1988.
The failure, for any reason of the parties to agree on the
tariff rates by October 1, lQ88, shall without any further
action by either party terminate this lease agreement without
any obligations.
From and after the first anniversary date of this
lease, if CITY amends existing tariff charges on file with the
Federal Maritime Commission for shiplift services, lay charges
on the rails and/or at the adjacent general cargo dock at the
Seward Marine Industrial Center which amendments result in an
increase thereof of more than fifteen percent (15\) in those
Seward Ship's Chandlery Lease
Page 27
rates over the preceeding twelve month period, then LESSEE shall
have the option for a period of thirty (30) days after the
effective date of the tariff changes to terminate this lease
agreement upon giving CITY sixty (60) days notice of its
exercise of that option to terminate. LESSEE shall not be
entitled to claim any damage as a result of any increase in
tariff charges and LESSEE'S sole remedy for any modification
thereof shall be this right to terminate the lease agreement
without recovery for any loss of business, revenue or other
damages by reason of the termination.
7.9--Right to Provide Substitute Leased Land.
Development of the Seward Marine Industrial Center by the City
of Seward is in its formative, beginning stages and both CITY
and LESSEE see the possibility of a change in the final layout
of all improvements to the Seward Marine Industrial Center.
CITY reserves the right to one-time, relocate LESSEE from its
present leasehold as described in Exhibit B of this lease to a
new work location selected by CITY. CITY shall pay for LESSEE's
actual, documented and certified costs of physically relocating
to the new work location and any lost profits, incidental and
consequential damages proximately the result of CITY's exercise
of its rights under this provision. CITY shall provide written
notice to LESSEE no less than one hundred fifty (150) days in
advance of its intent to move LESSEE's facilities. LESSEE must
object within ten (10) working days of receipt of notice if it
Seward Ship's Chandlery Lease
Page 28
.
.
finds the new location to critically impact its future economic
activities. If LESSEE objects, the City Council of the City of
Seward shall make the final determination as to the necessity
for the relocation, taking into account the impact on LESSEE's
operation and the public interest.
ARTICLE 8.--FORCE MAJEURE.
In the event LESSEE is delayed in the performance of
its obligations under this lease due to acts of God, fires,
floods, explosions, or war, the time period wherein such
performance is to occur shall be extended by that amount of time
necessary to compensate for the delay. The term acts of God
shall not be interpreted in this section to include adverse
weather conditions, it being understood that weather in Seward
Alaska is frequently adverse. Only a flood of a magnitude of a
100 year event or greater shall be considered a sufficient flood
to be a force majeure under this section.
ARTICLE 9.--LESSEE'S ACTS OF DEFAULT.
Each of the following shall be a "LESSEE 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:
a) Failure by LESSEE to pay promptly when due and
in no event later than ten (10) days from the due date thereof
the rentals required to be paid under this lease or failure to
promptly pay when due and in no event later than thirty (30)
.
Seward Ship's Chandlery Lease
Page 29
days from the due date thereof all other sums due City including
public fees or user charges for adjacent public facilities,
electrical, sewer or other service charges and all sums due the
Kenai Peninsula Borough including sales taxes, real and personal
property taxes associated with LESSEE's operations on the leased
land.
b) Failure by LESSEE to observe and perform any
covenants, conditions or agreements on its part to be observed
or performed under this lease (including those of Section 7.1)
for a period of thirty (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 LESSEE as 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
Seward Ship's Chandlery Lease
Page 30
.
law or statute of any jurisdiction, whether now or hereafter in
effect which shall remain undismissed for a period of six (6)
months from the date of commencement thereof.
d) Any reorganization of LESSEE, which
substantially alters any of the primary considerations CITY had
in entering into this lease with LESSEE, namely;
1) that construction and operation of
LESSEE's facility have and retain financial backing;
2) that the facilities be constructed and
operated in accordance with applicable environmental laws and
regulations and a sensitivity for environmental protection.
e) Violation by LESSEE of any laws or regulations
of the United States, or of the State of Alaska, or any
conditions of any permits issued by agencies of the City of
Seward, the Kenai Peninsula Borough, the State of Alaska or of
the United States Government pursuant to the regulations of such
agencies, for a period of sixty (60) days after written notice
specifying such violation has been given by the agency charged
with the enforcement of such laws, regulations or permits to
LESSEE; provided, however, if such violation be 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 violation is corrected.
.
.
Seward Ship's Chandlery Lease
Page 31
ARTICLE lO.--REMEDIES FOR LESSEE'S ACTS OF DEFAULT.
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 property
distrained in any commercially reasonable manner. It shall be
conclusively presumed that compliance with provision of the
Alaska 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 Leased Land. 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, and without
CITY becoming liable for any loss or damage which may be
occasioned to LESSEE thereby.
c) Declare the term of this lease terminated.
Seward Ship's Chandlery Lease
Page 32
.
.
d) Collect any and all rents due or to become due
from sub-tenants or other occupants of the Leased Land.
e) Recover whether this lease be terminated or not
from LESSEE reasonable attorney's fees and all other expenses
incurred by CITY by reason of the breach or default by LESSEE.
f) Recover an amount to be due immediately on
breach equal to six months' rent at the rate then in effect,
with credit to be given for any rent received from reletting the
premises received by CITY within that six month period.
g) If LESSEE does not immediately surrender
possession of the Leased Land after termination by CITY and upon
demand by CITY, CITY may forthwith enter into and upon and
repossess the Leased Land 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 to in this lease.
i) 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
.
Seward Ship's Chandlery Lease
Page 33
of anyone 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.
j) No delay or omission to exercise any right or
power accruing following an act of default shall impair any such
right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to time and
as often as may be deemed expedient.
ARTICLE ll.--CITY'S ACTS OF DEFAULT.
Each of the following shall be a "CITY Act of Default"
under this lease and the terms "acts of default" and "default"
shall mean, when they are used in this lease, anyone or more of
the following events.
11.1--Breach of CITY's Covenants of Quiet
Enjoyment and Possession.
a) Failure by CITY to observe and perform
any covenants or agreements on its part to be observed or
performed under this lease for a period of thirty (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 CITY by LESSEE; provided, however, that if said
default is such that it cannot be corrected within the
Seward Ship's Chandlery Lease
Page 34
.
.
applicable period, it shall not constitute an act of default if
corrective action is instituted by CITY within the applicable
period and diligently pursued until the default is corrected.
b) Violation by CITY of any applicable laws
or regulations of the United States, or the State of Alaska, or
any conditions of any permits issued by agencies of the City of
Seward, the Kenai Peninsula Borough, the State of Alaska or of
the United States Government pursuant to the regulations of such
agencies for a period of sixty (60) days after written notice
specifying such violation has been given by the agency to CITY;
provided, however, if such violation be such that it cannot be
corrected within the applicable period, it shall not constitute
an act of default if corrective action is instituted by CITY
within the applicable period and diligently pursued until the
violation is corrected.
ARTICLE 12.--REMEDIES FOR CITY'S ACTS OF DEFAULT.
Whenever an act of default by CITY shall have occurred,
and any applicable period for giving notice and any opportunity
to cure shall have expired, LESSEE shall have the following
rights and remedies in addition to any rights and remedies that
may be given to LESSEE by statute, common law or otherwise:
a) Withhold payment of any rental otherwise due
CITY.
.
b) Refuse to proceed with any of LESSEE's other
performance obligations under this lease.
Seward Ship's Chandlery Lease
Page 35
c) Recover whether this lease be terminated or not
from CITY reasonable attorney's fees and all other expenses
incurred by LESSEE by reason of the default by CITY.
d) Declare this lease terminated.
e) No expiration or termination of this lease
shall expire or terminate any liability or obligation to perform
of CITY's which arose prior to the termination or expiration
except insofar as otherwise agreed to in this lease.
f) Each right and remedy of LESSEE 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
LESSEE of anyone 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 LESSEE 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.
g) No delay or omission to exercise any right or
power accruing following an act of default shall impair any such
right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to time and
as often as may be deemed expedient.
-,
Seward Ship's Chandlery Lease
Page 36
.
.
ARTICLE l3.--TITLE TO IMPROVEMENTS INSTALLED BY LESSEE.
l3.l--Disposition of Improvements Installed by
LESSEE. LESSEE shall return the Leased Land to its original
condition, ordinary wear and tear excepted, upon the termination
or conclusion of this lease. All improvements constructed by
LESSEE on the Leased Land or on easements to or from same, such
as buildings, warehouses, conveyor systems, ditches, sewer and
water lines, dikes or berms and similar improvements shall, at
the option of CITY, be removed at LESSEE's sole expense, or
become the property of CITY upon termination of this lease for
any reason upon payment by CITY of compensation for same as
provided for in Section 13.2 below; provided,
a) upon termination by reason of the expiration of
the primary term of this lease, LESSEE may remove and retain
title to trade fixtures, inventory and equipment from the Leased
Land, provided LESSEE shall repair any damages to the Leased
Land caused by such removal; and
b) the parties recognize that some improvements
made by LESSEE during the lease term may have little, if any,
value to CITY at the end of the primary term and LESSEE must,
upon request of CITY, remove those improvements designated by
CITY, the full cost of demolition or removal of those
improvements shall be born by LESSEE; and
c) any other provisions of this lease to the
contrary notwithstanding, LESSEE, upon termination of this lease
.
Seward Ship's Chandlery Lease
Page 37
for any reason, may, but need not, remove and retain title to
trade fixtures and equipment from the Leased Land provided that
LESSEE shall repair any damages to the Leased Land caused by
such removal.
13.2--Determination of Compensation. If CITY
shall elect to retain title to any improvements pursuant to
Section 13.1, then CITY shall pay LESSEE the fair market value
of such improvements as determined by an appraisal conducted by
an independent MAI certified appraiser selected and paid for by
CITY. The determination of fair market value shall, unless
challenged as hereinafter provided, become final thirty (30)
days following the date a copy of the appraisal report is
delivered or mailed to LESSEE. If LESSEE does object to the
appraisal determination, it shall give CITY written notice of
the objection within thirty (30) days following CITY's delivery
or mailing of the report. LESSEE shall then engage a second
independent MAI certified appraiser at its expense to make a
second appraisal of the fair market value of the improvements.
Upon receipt LESSEE shall furnish a copy of the second appraisal
report to CITY.
If the second appraisal report reflects a fair
market value which varies from the first appraisal by no more
than fifteen percent (15%) then the compensation to be paid by
CITY shall be the average of the first and second appraisal
reports. If the second appraisal report reflects a fair market
Seward Ship's Chandlery Lease
Page 38
.
.
value which varies from the first appraisal by more than fifteen
percent (15%) and unless CITY and LESSEE agree upon compensation
between themselves, the compensation to be paid shall be
determined in accordance with the arbitration provisions
contained in ARTICLE 18 of this lease.
ARTICLE 14.--SUBLEASE OR ASSIGNMENT.
14.1--Assiqnment of Lease or Subleasing for
Operations. The parties recognize that a material reason for
the finding by the City Council of Seward in Resolution 88-___
that it is in the public interest to lease the lease land to
LESSEE is LESSEE's experience and history as a Seward owned and
operated business and prior participation in development of
private ship repair and construction facilities in the City of
Seward. Subject to the provisions of Section 14.2 CITY shall
have the right to refuse permission to any prospective assignee,
sub-lessee or sub-tenant even though such entity intends to use
the Leased Land for ship repair or construction.
14.2--Assignment of Lease for Security.
Notwithstanding Section 14.1 above, LESSEE may assign, encumber
or mortgage its interests in this lease or improvements on the
Leased Land, by deed of trust or other security instrument, to
an institutional lender ("Lender") for development of or
operations on the Leased Land, provided that Lender shall be
subject to all obligations of LESSEE under the terms of this
lease agreement. CITY shall furnish Lender, at the address
.
Seward Ship's Chandlery Lease
Page 39
provided to CITY by Lender in writing, with notice of any
default or breach of LESSEE under this lease. Lender shall have
the right (without being required to do so and without thereby
assuming the obligations of LESSEE under this lease) to make
good such default or breach within thirty (30) days after
written notice specifying such breach. Notwithstanding the
provisions of ARTICLE 9 above, no "LESSEE Act of Default" shall
exist until expiration of thirty (30) days after such notice is
furnished to Lender; provided, if Lender, with respect to any
default or breach other than a failure to make any required
payment of rent or other money, shall undertake within thirty
(30) days after notice to cure the default or breach and shall
diligently and in good faith proceed to do so, CITY may not
terminate this lease or re-let the Leased Land unless Lender
fails to cure the default or breach within a reasonable period
of time thereafter. Upon foreclosure or other assertion of its
security interest, Lender may further assign, transfer, or
dispose of its interests, provided that any subsequent assignee,
purchaser or transferee shall remain bound by each and every
term of this lease agreement.
SUbject to the foregoing, LESSEE shall have the
right to assign or sublet the Leased Land for use as a vessel
repair and construction facility consistent with all terms and
conditions of this lease, subject to approval of any prospective
assignee or sublessee by CITY, which approval shall not
Seward Ship's Chandlery Lease
Page 40
.
.
unreasonably be withheld.
ARTICLE 15.--INDEMNIFICATION.
LESSEE agrees to defend, indemnify and hold CITY
harmless from any and all claims for damages, including personal
injuries and property damage arising out of or resulting from
LESSEE's use of the Leased Land or the use of the Leased Land by
LESSEE's sub-lessees, agents or contractors or the public,
except for damages arising from the sole negligence or willful
acts or omissions of CITY, its agent, employees, or contractors.
ARTICLE 16.--INSURANCE.
Prior to commencement of construction of any facilities
on the Leased Land, LESSEE shall procure and maintain, at
LESSEE's sole cost and expense, commercial general liability
insurance, with limits of liability of One Million Dollars
($1,000,000) for all injuries and/or deaths resulting to anyone
person and One Million Dollars ($1,000,000) limit from anyone
occurrence. The limit of liability for property damage shall be
One Million Dollars ($1,000,000) for each occurrence and
aggregate. Commencing on the first annivaersary date of this
lease, the commercial general liability insurance shall have a
Two Million Dollar ($2,000,000) limit from anyone occurence and
property damage shall have a Two Million Dollar ($2,000,000)
limit for each occurrence and aggregate. Coverage under such
insurance shall also include explosion, collapse and underground
property damage hazards. Such insurance shall include a blanket
.
Seward Ship's Chandlery Lease
Page 41
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. LESSEE shall also provide fire and
extended coverage insurance for any buildings, equipment,
machinery, vessels of customers or any other property stored or
being worked on by LESSEE upon the Leased Land at replacement
value rather than original cost. LESSEE shall provide Workmen's
Compensation Insurance and insurance under the Harbor Workers
and Longshoremen's Compensation Act, and warehouse and motor
vehicle insurance and any other insurance required under any
permit or tariff of the City of Seward, Alaska. The minimum
amounts and types of insurance provided by LESSEE shall be
subject to revision in accordance with standard insurance
practices, in order to provide continuOUSly throughout the term
of this agreement and any extensions hereof, a level of
protection consonant with good business practice and accepted
standards in the industry. Such factors as increases in the
cost of living, inflationary pressures, and other
considerations, shall be utilized in assessing whether the
minimum insurance requirements should be increased. CITY may
notify LESSEE of any requested increase in insurance coverages.
If LESSEE asserts that any requested increases are unreasonable
Seward Ship's Chandlery Lease
Page 42
.
.
as measured against standards in the industry, then within
thirty (30) days of the request LESSEE may refer the
reasonableness of the request to arbitration under Article 18 of
this lease, but pending any final decision, LESSEE must acquire
the insurance. If a final decision of the arbitrators concludes
that CITY's request was unreasonable it shall require CITY to
reimburse LESSEE for the cost of coverage(s) that were beyond
those determined reasonable based on standards in the industry.
All insurance pOlicies shall provide for thirty (30)
days' notice of cancellation and/or material change to be sent
to CITY at the address designated in ARTICLE 37 of this lease.
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 (Best's Rating A or better).
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.
At least annually, commencing on the first anniversary
date of this lease and annually thereafter throughout the term
of this lease, LESSEE shall procure and submit to CITY a written
report from a reputable insurance broker acceptable to CITY that
.
Seward Ship's Chandlery Lease
Page 43
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.
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 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 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 l7.--CONDEMNATION.
If all or any part of the Leased Land 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
Seward Ship's Chandlery Lease
Page 44
.
.
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 Leased Land is condemned
for public use, LESSEE shall make a good faith determination as
to whether or not the taking of the part of the Leased Land
designated for condemnation will prevent if from continuing to
operate on the Leased Land. If LESSEE determines in good faith
that the condemning of such part of the Leased Land will prevent
it from continuing to operate on the Leased Land, LESSEE may
notify CITY in writing to this effect, and this lease shall then
be terminated for all purposes effective fifteen (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 term of this lease. LESSEE shall as a
condition precedent to such termination remove all encumbrances,
debts and liens to which the Leased Land 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 beginning to be effective on the
Seward Ship's Chandlery Lease
Page 45
actual date when LESSEE is effectively prevented from utilizing
the condemned land.
ARTICLE 18.--ARBITRATION.
Any dispute between CITY and LESSEE with respect to
any provision of this lease or the rights and obligations of the
parties hereunder shall be decided by arbitration, in accordance
with the provisions of this paragraph.
a) 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 fifteen
(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
beha If .
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 hearing 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
-:.
Seward Ship's Chandlery Lease
Page 46
.
decision. It is the intent of this subparagraph to provide for
a speedy and inexpensive resolution of disputes provided the
parties agree to such a procedure.
b) Formal Arbitration. If either party objects,
within fifteen (15) days of the second party's designation of an
arbitrator to the other's choice of an arbitrator pursuant to
paragraph (a) 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.
c) 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. In addition, as a punitive measure to encourage the
parties to amicably resolve their differences, the panel must
award the prevailing party an additional amount equal to those
costs, interest and attorneys' fees. The requirements imposed
on the arbitrator to make monetary awards (including punitive
measures in the preceeding sentence) shall not alter the
standards of review of particular disputes set forth in this
Lease Agreement.
.
.
Seward Ship's Chandlery Lease
Page 47
ARTICLE 19.--MAINTENANCE AND REPAIRS.
19.1--General Maintenance Obligations. After the
commencement of construction and during the entire remaining
term of this lease and every renewal or extension hereof LESSEE
shall, at LESSEE's sole cost, risk and expense, maintain the
Leased Land including any improvements placed thereon by LESSEE
or CITY including the transfer rails installed by CITY, in as
good condition as received or constructed by LESSEE, ordinary
wear and tear excepted. LESSEE shall prevent the discharge of
any pollutants to any public sewer system beyond those for which
the system was designed. LESSEE shall maintain in first class
condition at all times all fire, pOllution and other protective
equipment.
19.2--Contingency Plan/Environmental Hazards. In
the event required by the laws and regulations of the United
States, State of Alaska, Kenai Peninsula Borough or the City of
Seward, LESSEE shall develop and submit to the City Engineer a
toxic waste, chemical and oil spill contingency plan. Such
plan(s) must provide reasonable assurances to CITY that LESSEE
has and will comply with all applicable requirements of federal,
state and local laws and regulations including the Environmental
Protection Act. LESSEE shall be solely responsible for the
avoidance of any discharge of pollutants of any type from either
LESSEE's operations or any vessels under the care custody and
control of LESSEE to the Leased Land or adjacent public waters
Seward Ship's Chandlery Lease
Page 48
.
or adjacent private or public lands unless same is caused solely
by acts or omissions of CITY, its employees, agents or
contractors. 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 governmental agency claiming jurisdiction over LESSEE's
operation including, but not limited to the Environmental
Protection Agency, the State of Alaska Department of
Environmental Conservation, the U.S. Army Corps of Engineers,
the National Marine Fisheries Service, the Kenai Peninsula
Borough, the U.S. Coast Guard, the U.S. Fish and Wildlife
. Service, the National Park Service, the State of Alaska, the
City of Seward and others. The purpose of this provision is to
require continued information to be made available to CITY
.
relating to LESSEE'S operations and how those operations might
affect the Seward Marine Industrial center and the City of
Seward. In the event LESSEE receives from any governmental
agency any notice or other correspondence indicating
dissatisfaction with LESSEE'S operation on the basis of
environmental concerns, LESSEE shall promptly forward a copy of
same to CITY and in no event no later than three days from the
receipt by LESSEE of same.
CITY, at CITY's sole option and expense, may,
prior to the commencement of construction by LESSEE, perform
maintenance and preventative work on the Leased Land, exclusive
Seward Ship's Chandlery Lease
Page 49
of improvements placed thereon by LESSEE, in order to prevent
erosion, mitigate damage to plants and animals, or prepare the
Leased Land for eventual development by LESSEE or others by
grading, filling or contouring the Leased Land, any such work
performed by CITY shall be at CITY's sole expense unless LESSEE
agrees, in advance and in writing, to share such expense.
19.3--Inspection/Cure. CITY may periodically
inspect the Leased Land and facilities constructed thereon and
exercise its rights under Section 7.1 of this lease, but the
exercise of these rights shall not imply any obligation to do so
nor any obligation to do so in any particular way.
CITY may notify LESSEE in writing of any
deficiencies in the performance of LESSEE's maintenance and
pOllution control responsibilities and LESSEE shall promptly
within ten (10) days of receipt of such notice, or sooner if it
affects the public health or safety, advise CITY in writing of
its proposed schedule for performance of any work necessary to
cure such deficiencies.
If such deficiencies relate to the safety of
LESSEE's operation such that the surrounding land and port
facilities are exposed to risk or unnecessary potential hazards,
or if CITY is not satisfied with the proposed schedule of
repairs either because of the delays therein or the scope of the
repairs, CITY may engage an independent engineering consultant
well-versed and experienced in ship repair facilities or
Seward Ship's Chandlery Lease
Page 50
.
environmental engineering, as appropriate, who shall furnish to
CITY a comprehensive survey and report for the purpose of
establishing both the need and urgency to perform such
maintenance work. As soon as practicable following receipt of
said engineer's determinations and recommendations, if the
report requires repair then LESSEE shall pay the cost of the
report and perform such work in accordance therewith at LESSEE's
cost, risk and expense.
Should LESSEE dispute the necessity of any such
maintenance work as being necessary or advisable or reasonable
to protect the public facilities on the Leased Land or on
adjacent land facilities, it may submit the matter to
arbitration provided, however, that pending the decision of the
arbitrators it shall fully comply with the maintenance
requests. If an arbitration award (which shall include costs,
interest and attorneys' fees) should ultimately find that the
repairs were "not necessary" then LESSEE may deduct from future
rental payments the cost of such repairs. In deciding whether
repairs requested by CITY or required by an engineering report
are necessary the arbitration panel is to give primary
consideration to the safety and welfare of the Seward port
facilities and the citizens of Seward such that the highest
standards of industrial and environmental safety are achieved.
If any facility or service provided by CITY shall
become inadequate due to changes in environmental control
.
.
Seward Ship's Chandlery Lease
Page 51
standards or should any facility require updating or improvement
by reason of a change in LESSEE's use of the Leased Land or
operations therefrom, LESSEE shall either construct such
improvements at LESSEE's own cost or reimburse CITY for such
work at the option of CITY.
It is the intent of this provision to alleviate
from CITY the entire burden of compliance with present or future
environmental regulations or controls beyond those for which the
planned public port facilities have been designed.
ARTICLE 20.--FIRE PROTECTION.
LESSEE shall at its sole cost, risk and expense provide
fire prevention to the Leased Land such that risks to the
adjacent public port facilities and the public are minimized.
All facilities and activities by LESSEE shall be constructed
and/or conducted in compliance with all applicable fire
protection, building, plumbing, electrical, mechanical and other
codes.
ARTICLE 21.--ESTOPPEL CERTIFICATES.
Either party shall at ~ny time and from time to time
upon not less than ten (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),
Seward Ship's Chandlery Lease
Page 52
.
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.
.
ARTICLE 22.--CONDITIONS AND COVENANTS.
All the provisions of this lease shall be deemed as
running with the land, and shall be construed to be "conditions"
as well as "covenants", as though the words specifically
expressing or imparting covenants and conditions were used 1n
each separate provision.
ARTICLE 23.--NO WAIVER OF BREACH.
No failure by either CITY or LESSEE to insist upon the
strict performance by the other 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, covenant or condition. 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 24.--TIME OF ESSENCE.
Time is of the essence of this lease and of each
provision.
ARTICLE 25.--COMPUTATION OF TIME.
The time in which any act provided by this lease is to
.
Seward Ship's Chandlery Lease
Page 53
be done by 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.
ARTICLE 26.--SUCCESSORS IN INTEREST.
Each and all of the terms, covenants and conditions in
this lease shall inure to the benefit of and shall be binding
upon the successors in interest of CITY and LESSEE.
ARTICLE 27.--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.
ARTICLE 28.--GOVERNING LAW.
This lease shall be governed by, construed and enforced
in accordance with the laws of the State of Alaska.
ARTICLE 29.--PARTIAL INVALIDITY.
If any provision of this lease is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the
remainder of the provisions shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
ARTICLE 30.--RELATIONSHIP OF PARTIES.
Nothing contained in this lease shall be deemed or
construed by the parties or by any third person to create the
relationship of principal and agent or of partnership or of
joint venture or of any association between CITY and LESSEE; and
Seward Ship's Chandlery Lease
Page 54
.
.
neither the method of computation of rent, nor any other
provisions contained in this lease nor any acts of the parties,
shall be deemed to create any relationship between CITY and
LESSEE other than the relationship of lessee and lessor.
ARTICLE 31.--INTERPRETATION.
The language in all parts of this lease shall in all
cases be simply construed according to its fair meaning and not
for or against CITY or LESSEE as both CITY and LESSEE have had
the assistance of attorneys in drafting and revie~ing this lease.
ARTICLE 32.--NUMBER AND GENDER.
In this lease, the neuter gender includes the masculine
and the feminine, and the singular number includes the plural;
the word "person" includes corporation, partnership, firm or
association wherever the context so requires.
ARTICLE 33.--MANDATORY AND PERMISSIVE.
.
"Shall", "will" and "agrees" are mandatory; "may" is
permissive.
ARTICLE 34.--CAPTIONS.
Captions of the paragraphs and subparagraphs of this
lease are for convenience and reference only, and the words
contained therein shall in no way be held to explain, modify,
amplify or aid in the interpretation, construction or meaning of
the provisions of this lease.
ARTICLE 35.--AMENDMENT.
This lease is not subject to amendment except in
Seward Ship's Chandlery Lease
Page 55
writing executed by both parties hereto.
ARTICLE 36.--DELIVERY OF NOTICES - METHOD AND TIME.
All notices, demands or requests from one party to
another shall be delivered in person or be sent by mail,
certified or registered, postage prepaid, to the addresses
stated in ARTICLE 37 and shall be deemed to have been given at
the time of delivery or mailing.
ARTICLE 37.--NOTICES.
All notices, demands and requests from LESSEE to CITY
shall be given to CITY at the following address:
City Manager
City of Seward
P.O. Box 167
Seward, Alaska 99664
All notices, demands or requests from CITY to LESSEE
shall be given to LESSEE at the following address:
ARTICLE 38.--CHANGE OF ADDRESS.
Each party shall have the right, from time to time, to
designate a different address by notice given in conformity with
ARTICLE 37.
Seward Ship's Chandlery Lease
Page 56
.
IN WITNESS WHEREOF, the parties hereto have set their
hands and seals the date first hereinbefore set forth.
CITY:
CITY OF SEWARD
BY:
City Manager
ATTEST:
City Clerk
.
LESSEE:
JAMES T. PRUITT d/b/a
SEWARD SHIP'S CHANDLERY
BY'~-.lQi#
APPROVED AS TO FORM:
HUGHES, THORSNESS, GANTZ,
POWELL & BRUNDIN
Attorneys for the
City of Seward
BY:
7~ ()I~
Fred B. Arvidson
.
Seward Ship's Chandlery Lease
Page 57
STATE OF ALASKA
)
) ss.
)
THIRD JUDICIAL DISTRICT
THIS IS TO CERTIFY that on this day
of , 19BB, before me, the undersigned, a
Notary Public in and for the State of Alaska, personally
appeared and LINDA MURPHY, known to me
and to me known to be the City Manager and City Clerk of the
City of Seward, and known to be the individuals named in and who
executed the foregoing document, and they acknowledged to me
that they were authorized to execute the foregoing document by
authority granted them in the Municipal Code of Ordinances for
said City and for the uses and purposes therein set forth.
WITNESS my hand and notarial seal the day and year
first hereinabove written.
Notary Public in and for Alaska
My Commission Expires:
STATE OF ALASKA
)
) ss.
)
THIRD JUDICIAL DISTRICT
THIS IS TO CERTIFY that on this ~day of rll'~
1988, before me, the undersigned, a Notary Public in and fdj the
State of Alaska, personally appeared JAMES T. PRUITT, d/b/a
SEWARD SHIP'S CHANDLERY, known to me and to me known to be the
individual named in and who executed the foregoing document, and
he acknowledged to me that he signed and sealed the same as his
free and voluntary act for the uses and purposes therein set
forth.
WITNESS my hand and notarial seal the day and yeui
first hereinabove written.
Q~j.~
--
Notary Public in and for Alaska
My Commiss ion Expi res: My Commission Expire3l
Mul~h 16, .u~'
49095
Seward Ship's Chandlery Lease
Page 58