HomeMy WebLinkAboutRes1981-025
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CITY OF SEWARD, ALASKA
RESOLUTION NO. 81-25
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SEWARD, ALASKA, LEASING CERTAIN LAND TO TORKELSON-
KELLOGG, INC.
WHEREAS, for in excess of five years the City of Seward has
been attempting to attract industrial companies to Seward in
order to create employment opportunities and stimulate the econ-
omy, and
WHEREAS, the City of Seward has solicited various proposals
from local, national and international firms which efforts have
resul ted in a proposal by Torkelson-Kellogg, Inc., to lease
certain lands in the vicinity of 4th of July Creek and adjacent
to the Marine Industrial Terminal being developed by the City of
Seward for the development of a world-scale coal export facility,
and
WHEREAS, the proposal of Torkelson-Kellogg, Inc., to lease
certain lands has been the subject of extensive negotiations, and
WHEREAS, the City Council has determined in Resolution No.
81-9 that the disposition of certain land by way of sealed bid
would not be in the public interest for the reasons set forth in
that resolution, and
WHEREAS, under the terms of the lease the City is to receive
at least fair market value of the property during most of the
lease term and a percentage share of the value of shipments made,
and
WHEREAS, pursuant to notice as required by the Seward Code a
public hearing on the proposed lease was held on July 13, 1981,
and
WHEREAS, in accordance with Section 2-83 of the City Code
the City attorney has endorsed the lease agreement, and
WHEREAS, no adverse comments to the proposed have been
received from the public and the City Council remains convinced
that it is in the public interest to lease certain lands to
Torkelson-Kellogg, Inc.,
NOW, THEREFORE, BE IT RESOLVED by the City Council of the
City of Seward, Alaska, that:
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City of Seward, Alaska
Resolution No. 81-25
Page Two
section 1. In accordance with Section 12.3 (b) of the
City Charter this resolution shall be on file in the office
of the City Clerk for thirty days and shall be posted in
accordance with Section 2-84 of the City Code.
Section 2. Upon the expiration of thirty days as set
forth in section 1 above, this resolution shall become
automatically effective and the Mayor is instructed to
execute that certain lease agreement, a copy of which is
attached hereto as Exhibit A and incorporated herein by
reference, leasing the lands described therein to Torkelson-
Kellogg, Inc.
PASSED AND APPROVED by the
Seward, Alaska, this 27th day of
Ci ty Council of the City of
July , 1981.
AYES:
NOES:
ABSENT:
CITY OF SEWARD
'12 d.1Jdfl~.
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Cripps, Gillespie, O'Brien and Swartz
None
Campbell, Hugli and Soriano
Approved As To Form:
ATTEST:
'''..
HUGHES, THORSNESS, GANTZ
POWELL & BRUNDIN, Attorneys
for the City of Seward
Z11V~
Fred B. Arvidson
(
(City Seal)
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Item
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
2l.
22.
INDEX
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2.
Leased Land -------------------------------------
Utilities and Rights of Access ------------------
(a) ~hroug~ ~h~ ----------------------------~----
Pub11c Fac111t1es -------------------------------
(a) through (c) ---------------------------------
Restrictions to Title ---------------------------
Use of Leased Land ------------------------------
Definitions -------------------------------------
(a) through (d) ---------------------------------
Construction bv LESSEE --------------------------
~
(a) through (e) ---------------------------------
Easements and Dedications -----------------------
Petitions for Zoning, etc. ----------------------
(a) through (c) ---------------------------------
Term --------------------------------------------
(a), 1) through 6) ------------------------------
(b), 1) through 3) ------------------------------
Force Majeure -----------------------------------
Rental ------------------------------------------
(a) Annual Rental, 1) through 6) ----------------
(b) Percentage~Rental, 1) through 3) --~---------
Construction of Initial Facility ----------------
(a) Preliminary Engineering ---------------------
(b) Completion Date of Initial Facility ---------
Construction of Major Facility ------------------
(a) Feasibility Study ---------------------------
(b) Preliminary Engineering ---------------------
(c) Commencement of Construction ----------------
(d) Partial Completion --------------------------
(e) Completion Date of Major Facility -----------
LESSEE Acts of Default --------------------------
(a) through (e) ---------------------------------
Remedies for Acts of Default --------------------
(a) through (j) ---------------------------------
CITY'S Acts of Default --------------------------
(a) through (c) ---------------------------------
Remedies for CITY'S Acts of Default -------------
(a) through (d) ---------------------------------
Title to Improvements Installed by LESSEE -------
(a) through ( ) ---------------------------------
Sublease or Assignment --------------------------
LESSEE Financing --------------------------------
Indemnification, Insurance and Limitation
of Liability ------------------------------------
(a) Duty to Defend/Indemnify --------------------
(b) No special Damages --------------------------
(c) Insurance -----------------------------------
3.
4.
5.
6.
7.
8.
9.
Page
2
2
3/4
4
4
4
5
5
5/6
6
6/7
7
7
8
9
9
9/10
10
11
11/12
13-15
.16
17
17
17
18
18
18
19
19
19
19-21
21
22-24
24
24/25
26
26
26
27
27
28
28
28
29
29
23. Condemnation ----------------------------------- 31
24. LESSEE'S Right to Terminate or Exercise
of Option to Renew ----------------------------- 33
25. Arbitration ------------------------------------ 34
(a) Consent Panel ------------------------------ 34
(b) Formal Arbitration ------------------------- 35
(c) Arbitration Awards ------------------------- 35
26. M~intenance ~nd Repairs ------------------------ 35
27. F1re Protect1on -------------------------------- 35
28. Estoppel certificates -------------------------- 37
29. Conditions and Covenants ----------------------- 38
30. No Waiver of Breach ---------------------------- 38
31. Time of Essence -------------~------------------ 38
32. Computation of Time ---------------------------- 39
33. Successors in Interest ------------------------- 39
34. Entire Agreement ------------------------------- 39
35. Governing Law ---------------------------------- 39
36. Partial Invalidity ----------------------------- 39
37. Relationship of Parties ------------------------ 39
38. Interpretation --------------------------------- 40
39. Number and Gender ------------------------------ 40
40. Mandatory and Permissive ----------------------- 40
41. Captions --------------------------------------- 40
42. Amendment -------------------------------------- 40
43. Delivery of Notices - Method anq Time ---------- 40
44. Notices -----~~----------------~---------------- 41
45. Change of Address ------------------------------ 41
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6/25/81 :,
7/2/81' Rev.
7/7/81 Rev;
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LEASE AGREEMENT
This agreement made and entered into effective as of the
day of
1981, by and between the CITY OF SEWARD,
a first class municipal corporation located in the Kenai peninsula
Borough, State of Alaska, hereinafter referred to as "CITY" and
TORKELSON-KELLOGG, INC., a Utah corporation, hereinafter referred
to as "LESSEE."
WIT N E SSE T H:
WHEREAS, CITY and LESSEE are mutually interested in the
establishment of a major coal export facility at Seward, Alaska;
and
WHEREAS, LESSEE has demonstrated to CITY an intention to
develop and eXPand the export of Alaska coal from Seward by first
constructing and operating a small facility on Resurrection Bay
capable of handling presently-available coal and thereafter, the
developing world market and availability of coal permitting, con-
ii structing and operating a second and much larger facility on land
,;
if
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to be leased hereunder from the CITY; and
WHEREAS, CITY, as expressed more fully in city Council Reso-
lution 81-9 of May 11, 1981, has determined that LESSEE's inten-
tions and general development plans for a major coal export
facili ty at Seward, Alaska, are in the public interest of CITY
and therefore to be supported; and
WHEREAS, CITY AND LESSEE have reached agreement on the land
HOGHto THO'''''' CITY is to lease to LESSEE, the general terms and conditions of
GANTZ POWELLttSRUNOIN
A,TTO"NEVS AT lAW
so~ WHT TNll(t) ~VENU~
ANCHORAGE. AI( 99501
(9071274_7522
such a lease, and that the prospects for successful development
of a major coal export facility at Seward, Alaska, are enhanced
by concluding such an agreement now,
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NOW, THEREFORE, for and in consideration of the mutual pro-
mises and covenants hereinafter contained, the parties hereto
agree as follows:
1. Leased Land
The Leased Land granted by the CITY under this lease (here-
inafter referred to as "Leased Land") consists of lDD acres, more
or less, and is located adj acent to the projected public port
facility, as depicted on the attached Exhibit A, which is incorp-
orated 'into this lease by reference,
The Leased Land is more
particularly described as follows:
A tract of land located in fractional Sect. 13, TIS,
RIW, and fractional Section 18, TIS, RIE, Seward Merid-
ian, Third Judicial District, Alaska, described as the
South 1150. DO feet of the U. S. Survey 4828 and more
particuarly described as follows:
Beginning at corner No. 5 of said U, S, Survey 4828,
whbch is the true point of beginning; thence S
89 25' 47"W a distance of 3681.48 feet along the South
boundary to corner No. 5 of said survey; thence along
the original meander N 18007' 59"\~ a distance of 813.12
feet to an original meander corner; thence along an
original meander N 36054'01"E a distance of 472.21 feet
to a point; thence N 89025'47"E a distance of 3636,58
feet to a point of intersection of the East boundary of
UoS' Survey 4828; thence along said East boundary S
o 43' 90"E a distance of 1150, OD feet to the true point
of beginning.
This tract includes 1DO.21 acres, more or less,
This tract shall include two right-of-way easements as
follows:
The South 100 feet of said tract shall be retained by
the owner as a permanent access easement for future
industrial development; and the dedicated pUblic access
right-of-way for the Nash Road extension,
Bearings and distances are grid based on geographic
position, Alaska zone four.
2. Utilities and Rights of Access
In addition to the rights of possession and use conferred
HUGHES THO",HESS herein upon LESSEE to the Leased Land, CITY warrants that LESSEE
GA.NTZ POWEllaBRUNDIN
"'TTORNEYS AT LAW
$OIWlSl TtU.OAVltiUE
ANCHORAGE. AK 99501
19071274-7522
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HUGHES THORSNESS
GANTZ POWElL6 BRU UO[N
....TTORNEYS AT LAW
S09\':ESfTl<lRDAVENUE
ANCfIQRAGE.AK 99501
(907)2.7<1.7522
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shall have all rights of access to and egress from the Leased
Land necessary to construct and operate the Major Facility;
specifically:
(a) City intends to build a dock facility capable of
efficiently docking and loading vessels of at least IDO,DOO
tons dead weight at the Seward Industrial Marine Terminal.
When such facility is designed, CITY will make available
engineering specifications and will coordinate to the extent
possible the interface or use of such facility by LESSEE if
LESSEE so desires.
(b) Any necessary tidelands or other permits for use
of any federal land or navigable waters shall be obtained by
LESSEE provided the CITY will join in any necessary appli-
cation therefor.
(c) Any existing public easements or restrictions of
record including road and utility corridors shall not be
affected and any necessary relocation of public road, util-
i ty, or other easements shall be at the sole cost and
expense of LESSEE.
CITY shall not refuse reasonable
requests for relocation.
(e) LESSEE shall obtain any necessary local, state or
federal approvals for construction of any facilities on any
easements granted to LESSEE by CITY.
(f) Any easements or rights of access granted to
LESSEE by CITY need not be exclusive to LESSEE provided
LESSEE'S reasonable needs to transport coal to the Leased
Land and from the Leased Land to dockside are protected.
(g) Prior to the time when LESSEE is to begin con-
struction of the Maj or Facility hereunder, road access to
the Leased Land will be available for use sufficient in size
and stability to handle LESSEE'S transport needs.
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(h) In the event LESSEE decides to bring coal to the
Major Facility by slurry, CITY will grant LESSEE the neces-
sary rights-of-way to construct and operate a slurry line
adj acent to the access road or other location of LESSEE'S
choosing and reasonably acceptable to CITY.
3, Public Facilities
(a) Prior to the time when LESSEE is to begin construc-
tion of the Major Facility hereunder, electrical, sewer, and
water utili ties sufficient in s~ze or volume to support
LESSEE'S construction of the Maj or Facility will be made
available to LESSEE by CITY at the Leased Land,
(b) Prior to the time when LESSEE is to begin opera-
tion of the Major Facility hereunder, electrical, sewer, and
water utili ties sufficient in size or volume to support
LESSEE'S operation of the Major Facility will be made avail-
able to LESSEE by CITY at the Leased Land.
(c) CITY'S obligations, hereunder to provide utility
services are subject to LESSEE'S cooperation and assistance
by provision to CITY, at the earliest practicable date, of
preliminary engineering data sufficient to permit CITY,
using customary construction techniques and best efforts, to
construct the utili ties.
CITY'S obligations hereunder may
be delayed by such circumstances beyond its reasonable con-
trol in the same manner as the obligations of LESSEE may be
delayed in paragraph 11.
4. Restrictions to Title
The parties recognize that the CITY ~s in the process of
obtaining ownership of the Leased Land from other governmental
HOGHES THO",NESS enti ties inCluding the United States and the State of Alaska.
GANTZ POWElLaBRUNDIN
ATTO"Nl!:V5 AT LAW
50'''''UT1HI''DAVUlUl
ANCHORAGE, Ale 99501
(907)2H.7522
The CITY agrees to use best efforts and bear all costs to pursue
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HUGHES THORSNESS
"';AIHZ POWELLl\;BRUNOIN
ATTORNEYS AT LAW
509 W,ST lH1RQ ~VENUT
ANCHORAGE.AK 99501
190712:74-7522
,~
such applications, selections, permits and other steps reasonably
required to obtain ownership, The CITY makes no representations
or warranties as to the title of the Leased Land other than those
specifically contained herein.
LESSEE agrees to join wi th the
CITY and assist the CITY in obtaining title to the Leased Land by
executing such consents or documents as may be necessary or con-
venient in applications or proceedings before any federal or
state agency, including the Bureau of Land Management, to enable
the CITY to obtain title to the Leased Land,
5. Use of Leased Land
CITY does hereby lease the Leased Land to LESSEE for the
establishment and operation of a major coal export facility and
any incidental or necessary activities or structures related
thereto.
LESSEE may thereafter engage in such other additional
lawful industrial activities on the Leased Land as LESSEE shall
from time to time in its discretion determine subject to any
municipal charter or ordinance provision regulating such activi-
ties. Subject only to the 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 any use
authorized hereunder.
6. Definitions
As used in this agreement the following terms, in any form
or variation thereof, shall, unless otherwise provided, have the
following respective meanings, certain other additional terms as
defined in other paragraphs of this lease shall have the respec-
tive meanings therein attributed to them.
(a) "Dockside Seward" means any coal or other com-
modity from the Major Facility loaded into the hold or hull
of a ship at a port facility in Seward, Alaska. Any pricing
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HUGH[S THORSNE:SS
GANTZ POw':LLaBRUNDIN
ATTORNEYS AT l.....w
~Ol WHT TfllRIlAV(NUt
ANCHORAGE. A" nSOl
(!lO7) 274.7522
based upon Dockside Seward shall include the commodity pur-
chase price, Shipping costs to Seward, storage, treatment ln
preparation for shipping and all other processing prior to
loading into a vessel, and costs of loading into a vessel
but shall exclude all costs incurred thereafter such as
transportation by sea and subsequent processing or prepara-
tion for ultimate use,
(b) "Initial Facility" means a coal trans loading and
export facility to be constructed by LESSEE on Resurrection
Bay, Alaska, capable of handling at least one million tons
of coal per year,
(c) "Public Port Facili ty" means the public dock
facility and adjacent structures, tentative plans for which
are shown in Exhibit A and to be constructed by the CITY and
adjacent or proximate to the Leased Land.
(d)
"Major Facility" means a coal trans loading and
export facility utilizing state-of-the-art technology to be
constructed by LESSEE on the Leased Land and capable of
handling at least five million tons of coal per year and
loading vessels of at least 100,000 tons dead weight.
7, Construction by LESSEE
LESSEE shall have the right to erect, maintain, alter,
remodel, reconstruct, rebuild, build and/or replace buildings and
other improvements on the Leased Land, and correct and change the
contour of 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 free of
mechanics' and materialmen's liens, and LESSEE shall provide
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or see provided adequate Workmen's Compensation Insurance
and liability insurance for itself and its subcontractors.
(c) LESSEE shall supply CITY with a copy of all build-
ing plans and specifications and site plan or plans for the
Leased Land,
(d) Any general contractor employed by LESSEE shall be
appropriately bonded by use of performance and labor and
material payment bonds when the cost of the work is over
Twenty Thousand Dollars ($20, ODD. 00) ,
Copies of all such
bonds shall be furnished to CITY prior to commencement of
construction,
(e) CITY may, as contemplated by Alaska Statutes give
notice of nonresponsibility for any improvements constructed
or effected by LESSEE on the Leased Land.
8. Easements and Dedications
In order to provide for the more orderly development of the
Leased Land, it may be necessary, desirable or required that
street, water, sewer, drainage, gas, power line and other ease-
ments and dedications and similar rights be granted or dedicated
over or within portions of the Leased Land, As additional con-
sideration to LESSEE for the execution of this lease CITY shall,
upon request of LESSEE, join the LESSEE in executing and deliver-
ing such documents from time to time and throughout the lease
term as may be appropriate, necessary, or required by the several
governmental agencies, public utili ties and companies for the
purpose of granting such easements and dedications,
9. Petitions for Zoning, etc.
In the event that at any time LESSEE deems it necessary or
H"CHESTH""'" appropriate to obtain use, zoning or subdivision and precise plan
GANTZPOIVElL&BRUNDIN
A,nOR"E~S ...r LAW
509 WEST T"I~D ~~ENU[
ANCHORAGE. AK !l9'>OI
(9071214.75.22
approval and permits for the Leased Land, or any part thereof,
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HUGHES THOR5NESS
GAhTZ POwELLaBRUNOIN
ATforlNEYS AT LAW
~O, WE'T THIRD ",Y(MU!
ANCHORAGE.AK 99501
(9071274.7522
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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 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 estab-
lishment 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
soley by LESSEE.
(c) At the expiration of the lease term (including any
extended period) and subject to the provisions of paragraphs
19, all buildings and equipment on the Leased Land other
than portable equipment shall become the property of CITY
without the payment of any compensation to LESSEE.
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HUGltES THORS"ESS
GANTZPOWEll&BRUNDIN
~Tra~"F.YS AT LAW
50~ \\'<5' 1>IIRD AVENUE
ANCHORAGE, AIC 99501
(907) 274.7522
10. Term
(a) The term of this lease shall be as follows:
1 )
Initial Facility Construction Term - From and
after the effective date of this lease until the com-
pletion of the Initial Facility to where it is ready to
receive and transload coal, or the expiration of two
years, whichever event first occurs.
2) Initial Term - From and after the end of the
Ini tial Faci1i,ty Construction Term until the breaking
of ground to begin construction of the Major Facility,
or the expiration of eight years, whichever event first
occurs.
3) Maj or Facility Construction Term - From and
after the end of the Initial Term until completion of
the Major Facility to where it is ready and capable of
receiving and trans loading five million tons of coal
per y"ear, or the expiration of five years, whichever
event first occurs.
4) Primary Term - From and after completion of
the Major Facility to where it is ready and capable to
receive and transload five million tons of coal per
year, and for a period of ten (10) years.
5) First Optional Term - From and after comple-
tion of the Primary Term and for a period of fifteen
(15) years,
6) Second Optional Term - From and after comple-
tion of the First Optional Term and for a period of
fifteen (15) years,
(b) Subject only to the delay provisions of paragraph
11, the term periods identified in subparagraphs (a) 1)
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through 6) above shall run consecutively and automatically
in the order stated except that:
1)
This lease may be terminated at the option of
LESSEE by written notice to CITY at any time prior to
January 1, 1982, or any time during the Initial Term of
this lease as defined in subparagraphs (a) 2) above,
2) This lease may be terminated at the option of
CITY by written notice to LESSEE,
i) I f LESSEE by October
1,
1981,
has not
reached agreement with Usibelli Coal Mine, Inc.,
to secure at least a minimum supply of coal to
market; or
ii) If the Initial Facility is not ready to
receive and transload coal at an annual volume of
at least one million tons per year before expira-
tion of the Initial Facility Construction Term; or
Hi)
If, after 90 days' written notice and
opportuni ty to cure have been given LESSEE by
CITY, LESSEE does not meet any of the time mile-
stones set forth in paragraph 14 for engineering
and completion of the Major Facility.
3) CITY may, after ninety (90) days I wri tten
notice and opportunity to cure have been given LESSEE,
terminate the lease for LESSEE'S failure to meet any of
the time milestones set forth in paragraph 14 for
engineering and completion of the Major Facility.
11, Force Majeure
Any other provisions of this lease to the contrary notwith-
"UGHES ,HORSNm standing, in the event LESSEE is delayed from beginning or com-
GANTZ POWELLaBAUNDIN
"TTOtlNEY~ AT LAW
~OI ViE~T TllIll.D "VlIH>E
ANCHORAGE. AI( 99501
190])Z74.7SZZ
pleting construction of the Initial Facility or the Major Facil-
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HUGH[5 THORSN(S5
SANTlPOWELlllBflUIWIN
"TTORNEY~ AT LAw
50' W;:ST THIHll "'Yl~UE
ANCHORAGE, AI( 99501
1907l 2:14-7522
ity within the time limits set forth in paragraph 10 above, or
otherwise delayed in performing any of its obligations under this
lease, due to acts of God, strikes or other concerted acts of
workmen, unavailability of labor or materials, fires, floods,
explosions, war, an unreasonably foreseeable delay in the issuance
of any approvals or permits from local, state or federal agencies,
or CITY or other causes beyond LESSEE'S reasonable control, the
time period wherein such beginning or completion of construction
1S to occur or LESSEE is otherwise to perform shall be extended
by that amount of time necessary to compensate for the delay.
12.
Rental
The rental for the Leased Land shall be the sum of the
annual rent and the percentage rent and shall be determined and
paid as follows:
(a) Annual Rent
Any and all annual rental due under this lease shall be
paid in advance in yearly installments in accordance with
the various term periods and as follows:
1)
Initial Facility Construction Term
No
annual rental shall be due during the Initial Facility
Construction Term period.
2) Ini tial Term - The annual rental during the
Initial Term period shall be the fair market value at
the highest and best use of the Leased Land, exclusive
of improvements placed thereon by LESSEE and without
consideration to LESSEE'S intended use of the land
unless that use is coincidentally the highest and best
use of the land,
3 )
Major Facility Construction Term - No annual
rental shall be due during the Major Facility Construc-
tion Term period.
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HUGHES THORSl'iI:SS
G^NTZPOWELlaBRUNOIN
ATTORNEYS "'T l"'W
501 wtsT THIIIOAVfNUE
ANCHORAGE. AK 99501
(90])274.7522
4) Primary Term - The annual rental during the
Primary Term period shall be One Dollar ($1. aD) per
acre of Leased Land or portion thereof,
5 )
First Optional Term
The annual rental
during the First Optional Term period shall be the fair
market value rental as actually utilized by LESSEE but
exclusive of LESSEE'S improvements thereon,
6 )
Second Optional Term
The annual rental
during the Second Optional Term period shall be the
fair market value rental as actually utilized by LESSEE
but exclusive of LESSEE'S improvements,
Any fair market value rental provided for during the Initial
Term, First or Second Optional Term period shall be determined as
follows:
Not less than ninety (9D) days before the beginning of the
Ini tial Term and thereafter before each third year increment of
the period, CITY at its own expense shall employ an independent
MAl certified appraiser to detel~ine the fair market value rental
of the Leased Land exclusive of LESSEE'S improvements at the
highest and best use of the Leased Land and without consideration
to LESSEE'S intended use of the land unless that use is coinci-
dentally the highest and best use of the land.
Not less than ninety (9D) days before the beginning of the
First or Second Optional Term period and thereafter before each
third year increment of the period, CITY at its own expense shall
employ an independent MAl certified appraiser to determine the
fair market value rental of the Leased Land as actually utilized
by LESSEE, exclusive of LESSEE'S improvements,
within forty-five (45) days after any such appraisal, CITY
shall provide LESSEE a copy of the MAl certified appraiser's
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GANTZ POWELt.aBRUNOI~1
....TTORNEYS AT LAW
SO q ~"S T TllIIlD "'Vt~ Ul
ArlCHORAGE. AK 99501
(9071214.7522
written appraisal report.
I f LESSEE does not object to that
appraisal, the stated rental rate shall apply for the next suc-
ceed ing term period or three-year increment.
If LESSEE does object to the appraised rental rate, it shall
give CITY written notice of objection before the date when the
new rental rate is to be effective. LESSEE shall then engage a
second independent MAl certified appraiser at its expense to make
a second appraisal of the fair rental value of the Leased Land as
actually utilized by LESSEE and exclusive of LESSEE'S improve-
ments. LESSEE shall furnish CITY a copy of the second appraisal
report.
If the second appraisal reflects a fair market value rental
which varies from the first appraisal by no more than ten percent
(10%), then the new rental rate shall be tile 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 ten percent (10%), then, unless CITY and LESSEE agree
on a rate among themselves, the new rental rate shall be deter-
mined in accordance with the arbitration provisions contained in
paragraph 25.
LESSEE'S obj ection to the rental rate and engagement of a
second appraiser shall not postpone LESSEE's Obligation to pay
the annual rental as described in CITY'S notice of rental rate
based on the first appraisal.
LESSEE shall deposit into a sepa-
rate trust account the amount of rental rate as fixed by the
first appraisal until the question of rental adjustment is final-
ly resolved,
(b) Percentage Rental
In addition to the Annual Rental described above,
LESSEE shall pay to CITY, as percentage rental, a percentage
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GANTZ POWEL.L6BRUNDIN
ATTORNEYS AT L"W
,CtWEST THIIlD#<VENUl
ANCHORAGE. Ale 99501
(901)214-752.2
of the sales price of any coal or other commodity actually
sold and loaded into a vessel from the Major Facility. For
purposes of this provision, "sales price" means the price of
the coal or other commodity delivered to the vessel dock-
side. I f the coal or other commodity is sold other than "as
delivered to the vessel dockside" an "as delivered to the
vessel dockside" price shall be computed from the as actually
sold price.
I)
Percentage Rental shall be payable monthly on
or before the 20th day of each month for any actual
shipments of the previous month from the Major Facility,
It is estimated by the parties that the Major Facility
to be constructed by LESSEE will have the capacity to
export between five million and ten million tons of
coal each year.
2 )
LESSEE agrees to use best efforts to max~m~ze
shipments from the Major Facility to the extent that
such shipments are economically justified.
CITY may, upon request by LESSEE excuse any per-
centage rent payment based upon CITY'S finding that the
reasons for failure to ship were beyond LESSEE'S reason-
able control or were caused by LESSEE'S expansion or
remodeling of the Major Facility.
3) The price upon which the percentage rent
shall be based shall be the price or value of the coal
or other commodities delivered to the holds of ships
Dockside Seward.
If the point of sale is Dockside
Seward, then the actual price per ton charged shall be
utilized
for computation of the percentage rent. If
point of
sale is other than Dockside Seward LESSEE
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shall compute a Dockside Seward price for purposes of
determining the value Dockside Seward.
If the CITY
objects to such computed value based on a belief that
that computed price Dockside Seward 1S artificially
low, the CITY may request arbitration in accordance
wi th the provision of paragraph 25 herein to fix, for
one year, a value of the coal Dockside Seward for
purposes of calculating the percentage rent, In fixing
the value at Dockside seward for purposes of calcula-
tion of the percentage rent herein, the arbitrators
shall consider the actual price at the point of sale
and adjustments thereto for shipping and handling.
The percentage rent shall be one and one-half
percent (1-1/2%) of the actual sales price Dockside
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Seward (or if the point of sale of the coal or commodity
is other than Dockside Seward, the computed sales price
as defined in this paragraph) on each ton of coal or
other commodity actually shipped.
LESSEE shall supply on forms provided by the CITY,
monthly reports of all shipments and invoices for ship-
ments, indicating at least tonnage and price per ton of
all shipments.
CITY, its agents, attorneys and accountants shall
have reasonable access, at all times to any and all
records of shipments to verify both the quantity and
price of shipments by LESSEE.
Such records shall be
made available at the City of Seward, Alaska, for
inspection by CITY, its agents, attorneys and account-
HUGHES THORSNr:SS
GANUPO'NELLll:BRllNOIN
ants.
ATTO..NEYf; AT LAW
~ 0' Y.f 51 rlllR D AY[~ li[
ANCHORAGE. AK 9"501
(9071 17~-7S 2 2
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13, Construction of Initial Facility
LESSEE shall promptly and in no event later than the dead-
lines set forth herein construct at its sole expense an Initial
Facility on Resurrection Bay in Seward, Alaska, for coal trans-
load lng and export with an annual capacity of at least one
million tons.
It is understood by the parties that a principal
reason for a finding by the City Council of Seward in Resolution
81-9 that it is in the public interest to lease the Leased Land
to LESSEE is LESSEE'S commitment to promptly construct and place
into operation a coal facility on Resurrection Bay and the result-
ing benefits from its construction and operation including employ-
ment for residents of the CITY and demonstration of the feasibil-
ity of large scale coal export from Alaska in general and Seward
in particular.
Accordingly, LESSEE I S obligations to construct
and operate an Initial Facility are conditions precedent to this
lease.
In order to assure CITY that LESSEE has and will continue to
exercise all reasonable efforts to promptly construct and place
in operation the Initial Facility, a representative of LESSEE
will report personally to the CITY of Seward no later than by
October 1, 1981, on efforts to secure a supply of coal to market.
It is understood that in the event LESSEE has not reached agree-
ment with Usibelli Coal Mine, Inc" by October 1, 1981, to secure
at least a minimum supply of coal to market, that CITY has the
option under this lease to terminate the lease.
In order to further assure CITY that LESSEE has and will
continue to exercise all reasonable efforts to promptly construct
and place into operation the Initial Facility, LESSEE will make
HOGH" THO""'" available for CITY'S inspection, within six (6) months after the
GANTZ POW[LLaBnUN01N
ATTO"NEYS AT LAW
~a! WEST THIRD AWtNlJE
ANCHORAGE. At{ 99501
(907)27<1.7522
effective date of this lease, LESSEE I S preliminary engineering
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drawings and specifications for the Initial Facility in sufficient
detail to demonstrate LESSEE'S intentions to proceed,
It is LESSEE'S intention to complete construction of the
Initial Facility within twenty-four (24) months of the effective
date of this lease and LESSEE is aware, as provided in paragraph
10 that, except for intervening delays beyond LESSEE'S control,
this lease shall, (unless extended by the CITY at CITY'S sole
option), terminate if the Initial Facility is not completed
within said twenty-four (24) month period,
(a) Preliminary Engineering
wi thin six (6) calendar months of the date of this
lease LESSEE shall present to the CITY the completed prelim-
in ary engineering specifications and plans for the Initial
Facility.
Such specifications and plans shall be in suffi-
cient detail so as to depict the layout of the entire Initial
Facility and the operating plan.
(b) Completion Date of Initial Facility
wi thin twenty- four (24) calendar months from the date
of this lease LESSEE shall have completed construction of
the Initial Facility.
14. Construction of Major Facility
The purpose for CITY granting LESSEE use of the Leased Land
is so LESSEE will construct and operate the Major Facility on it.
CITY reco~lizes, however, that, but for the following agreed upon
milestones, whether or when to construct the Major Facility is a
decision wi thin the discretion of LESSEE and how LESSEE decides
shall under no circumstances constitute a breach or act of default
of this lease,
In the event LESSEE decides not to construct the
""'"" THO'"'''' Major Facility, the sole consequence is termination of this
GANTZ PONElLaBRUNDIN
ATTORNEYS J\T LAW
$09WfSl THIROAVu,UE
ANCHORAGE. AI( 99501
(90il 214-75ZZ
lease,
In the event LESSEE fails to meet any of the following
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GM:Tl PO'.'/ELL,BRU~DIN
4TT0RNEYS AT I-AW
50' \1;[$' HIIRD "'Vt~U[
A'iCHORAGE. AK 99501
(9071 27~.7Sn
agreed upon milestones after ninety (90) days' written notice and
opportunity to cure from CITY, the sole consequence is that CITY
may thereupon terminate this lease as provided in paragraph 10 of
this lease,
In order to assure CITY that LESSEE will exercise reasonable
efforts to construct and place into operation the Major Facility
without unduly restricting LESSEE'S flexibility 1n planning,
timing and actual construction, the following milestones have
been established and LESSEE'S meeting of each shall, at the
discretion of CITY, serve as a necessary condition precedent to
continuation of the lease, even though LESSEE may have expended
effort in complying with previous milestones:
(a) Feasibility Study
Within five (5) years of the completion date of the
Ini tial Facility LESSEE shall present to the CITY a com-
pleted feasibility study of the Major Facility.
(b) Preliminary Engineering
No later than seven years after the end of the Initial
Facili ty Construction Term, LESSEE shall make available to
the CITY at Seward, Alaska, for its inspection and review
the completed preliminary engineering specifications and
plans for the Major Facility. Such specifications and plans
shall be in sufficient detail so as to depict the layout of
the entire Major Facility and the operating plan.
(c) Commencement of Construction
wi thin eight (8) years after the end of the Initial
Facili ty Construction Term LESSEE shall commence construc-
tion of the Major Facility. LESSEE may satiSfy this require-
ment by obtaining all necessary approvals or permits from
any governmental agencies required to commence construction
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HUGHES THORSNtSS
GANTZ POWELlaBRUNDIN
ATTORNEYS AT LAW
509 ",EST T"I~D AVENUE
ANCHORAGE.AK 99501
(907)214.7522
and by moving materials and equipment on to the site and
breaking ground with the intention that such construction
will continue to completion.
(d) Partial Completion
within three (3) years from the date of commencement of
construction of the Major Facility LESSEE shall have com-
pleted at least fifty percent (5D%) of the Major Facility as
demonstrated by a certificate of the Construction Manager
and with review and concurrence by the City Engineer.
(e) Completion Date of Major Facility
within five (5) years from the date of commencement of
the construction of the Major Facility LESSEE shall have
completed construction of the Major Facility to where it is
capable of handling at least five million tons of coal per
year,
15. LESSEE 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, anyone or more
of the following events:
(a) Failure by LESSEE to pay promptly when due and in
no event later than twenty-one (21) business days from the
due date thereof the rentals required to be paid under this
lease,
(b) Failure by LESSEE to observe and perform any
covenants, conditions or agreement on its part to be observed
or performed under this lease, other than those set forth in
paragraphs 13 and 14 for a period of thirty (30) days after
wri tten notice specifying such failure, requesting that it
be remedied, and stating that it is a notice of default, has
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HUGHES THORSi~ESS
GII:rll POWEl1.&BRUNOIN
ATT0<1NCY5 AT I..o,W
501 W~ST T~IRO AVPHJ[
IINCHORAGE..I." 9950\
(907) 274.7522
---
been given to LESSEE by ble 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 1S insituted by LESSEE within the
applicable period and deligently pursued until the default
I
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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 bank-
rupt, the petition or application by LESSEE to any tribunal
for any receiver or any trustee for itself or for any sub-
stantial part of its property; or the conunencement of any
proceeding relating to LESSEE under any bankruptcy, insolv-
ency, reorganization, arrangement or readjustment of debt
law or statute or similar law or statute of any jurisdic-
tion, whether now or hereafter in effect which shall remain
undismissed for a period of six (6) months from the date of
corr~encement thereof.
(d) Any reorganization of LESSEE or of its financial
relationship to Wheelabrator-Frye, Inc" which substantially
alters any of the primary considerations CITY had in enter-
ing into this lease with LESSEE, namely;
1) That construction and operation of the Major
Facili ty
financial
by
retain
backing
have
and
Wheelabrator-Frye, Inc.;
2) That operation of the Major Facility be by a
respectable operator;
3) That the Major Facility be constructed and
operated in accordance with applicable environmental
laws and regulations and a senstivity for environmental
protection,
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(e) Violation by LESSEE of any laws or regulations of
the United States, or of the State of Alaska, or any condi-
tions 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, regu-
lations or permits to LESSEE; provided, however, if such
viola tion be such that it cannot be corrected wi thin the
applicable period, it shall not constitute an act of default
if corrective action is instituted by LESSEE wi thin the
applicable period and diligently pursued until the violation
is corrected,
Furthermore, if LESSEE shall contest such
alleged violation through appropriate judicial or admini-
strative channels, the time period specified herein shall
not commence until such proceedings are finally determined;
provided, however, that any such extension due to appeal of
agency or judicial decisions shall not be effective if the
effect of the interim administrative or judicial action is
to cause a stoppage of any of the acti vi ties other than
those of LESSEE for which the Seward Port Facility are to be
constructed including cargo loading and offloading, cargo
storage, vessel berthing and docking, vessel servicing,
vessel construction, vessel repair, metal fabrication and
any activity which is an integral support function of any of
these named activities,
16. Remedies for Acts of Default
HUGH" THO,,"'" Whenever an act of default by LESSEE shall have occurred,
GANTZ POWEll a BRUNDIN
.-.TTOI'lNE:YS AT LAW
50'\-.ESTTlURD"WlIJE and any applicable period for giving notice and any opportunity
ANCHORAGE. AK 9950\
(907)2:74.7522
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GANTZ POWELLaBRUNDltl
"'TTO~NEY~ AT LAW
'01 W~ST TUlROAVUIUl
ANCHORAGE. AI( 99501
19071274-7522
--.,
to cure shall have expired, the CITY shall have the following
rights and remedies all in addition to any rights and remedies
that may be given to the CITY by statute, common law or other-
wise:
(a) The 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 the CITY to dispose of
property distrained in any commercially reasonable manner.
It shall be conclusively presumed that compliance with pro-
visions of the Alaska Uniform Commercial Code (AS 45.09,504)
wi th respect to sale of property shall be a commercially
reasonable disposal,
CITY, however, agrees to waive and
does hereby waive this and any common law or statutory law
right to distrain any of LESSEE'S personal property in which
LESSEE seeks to grant or does grant a security interest in
order to obtain financing.
(b) The CITY may re-enter the premises and take pos-
session thereof and, except for any personal property of
LESSEE which CITY has waived its right to distrain under
subpart (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 the CITY becoming liable for
any loss or damage which may be occasioned to LESSEE thereby,
(c) Declare the term of this lease terminated.
(d) Collect any and all rents due or to become due
from sub-tenants or other occupants of the Leased Land.
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HUGHES THORSNESS
GANTZ POWELlaBRUNDIN
ATTORN!,;YS AT LAW
509 'foFST TtIIRD AVrNUE
ANCHO~AGE. AK 99S01
(9071274.7522
(e) Recover whether this lease be terminated or not
from LESSEE reasonable attorney's fees and all other expenses
incurred by the CITY by reason of the breach or default by
LESSEE.
(f) Recover an amount to be due immediately on breach
equal to the difference between the rent and the fair and
reasonable rental value of the Leased Land for the remainder
of the lease term.
In the computation of such damages, the
difference between the annual rental installments thereafter
becoming due and the fair and reasonable value of the Leased
Land for the period of which such installments is payable
shall be discounted to the date of such breach at the rate
of eight percent (8%) per year,
If the Leased Land or any
part thereof be re-let by the CITY for the unexpired term of
this lease, or any part thereof, before presentation of
proof of damages, the amount of rent reserved upon such
re-letting!
shall be deemed to be the fair and reasonable
rental value for the Leased Land.
(g) If LESSEE does not immediately surrender posses-
sion of the Leased Land after termination by CITY and upon
demand by the CITY, the 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 expira-
tion except insofar as otherwise agreed to in this lease,
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HUGHtS TtWRSNESS
GAl>. TZ POWELLII:BRU ~~DIN
ATTORN;::"'S AT LAW
50~ VHST rlflRO AH',llt
A:->CHORAGE. AK 99501
(!l01) 274-7522
(i) Each right and remedy of the 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 the CITY 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 pre-
elude the simultaneous or later exercise by the CITY of any
or all other rights or remedies provided for in this lease
or now or hereafter 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.
17, CITY'S Acts of Defaults
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:
(a) Breach of CITY'S covenant of quiet enjoyment and
possession.
(b) Failure by CITY to observe and perfoL"Ill any other
covenants or agreements on its part to be observed or per-
formed 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, how-
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HUGHES THOR$NESS
GArnl POIVELLaBRUN01N
ATTOill"E:VS AT LAW
SQg WfST HURD AVE~UE
A~CHORAGE. AI( 99501
19011 274_7522
ever, that if said default is such that it cannot be cor-
rected within the applicable period, it shall not constitute
an act of default if corrective action is instituted by CITY
wi thin the applicable period and diligently pursued until
the default is corrected.
(c) Violation by CITY of any 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. Further-
more, if CITY shall contest such alleged violation through
appropriate judicial or administrative channels, the time
period specified herein shall not commence until such pro-
ceedings are finally determined; provided, however, that any
such extension due to appeal of agency or jUdicial decisions
shall not be effective if the effect of the interim admini-
strative or judicial action is to cause a stoppage of any of
LESSEE'S activities for which the Major Facility is to be
constructed including cargo loading and offloading, cargo
storage, vessel berthing and docking, and any activity which
is an integral support function of any of these named activi-
ties.
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HUGHES THORSfliESS
GAfHZ POWELLaBRUtlDIN
ATTORN':Y:l AT lAW
SO I ",EST THlI~D AVENUE
ANCrlORAGE. AI( 99501
(907)214-15.22
,"'"'
lB. 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 and in addition to any rights and remedies that may
be given to the LESSEE by statute, common law of 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.
(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.
19. Title to Improvements Installed by LESSEE
All improvements constructed by LESSEE on the Leased Land or
on easements to or from same, such as bu'ildings, warehouses,
conveyor system ditches,
sewer lines, water lines, dikes or
berms, and similar improvements, shall become the property of
CITY upon the termination of this lease.
Any other provisions of this lease to the contrary notwith-
standing, LESSEE, upon termination of this lease 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; provided,
however, LESSEE shall not be required to remove or cover any
underground structures exposed by any removal of trade fixtures
and equipment.
LESSEE'S unencumbered property interest in any
trade fixtures or equipment not so removed by LESSEE shall pass
to CITY.
-26-
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LESSEE and CITY agree that for purposes of this lease the
following items are deemed to be trade fixtures and/or equipment,
along with any other items on the Leased Land which would nor-
mally be so considered:
(a) Coal unloading equipment
(b) Conveyors, slurry pipeline and other coal
,
'; processing equipment
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(c) Coal crushers, screens, slurry mixing and
other coal processing equipment
(d) Coal stockpiling equipment
(e) Coal reclaiming equipment
(f) Shiploading equipment
(g) Electrical control equipment and accessorles
(h) Fire protection and other safety equipment
(i) Dust suppress lon, dust collection, water treat-
ment and other environmental protection equlp-
!]lent
(j)
(k)
(1)
20. Sublease or Assignment
The parties recognize that a material reason for the finding
by the City Council of Seward in Resolution Bl-9 that it is in
the public interest to lease the Leased Land to LESSEE is LESSEE'S
international reputation and expertise in construction and opera-
tion of facilities similar to the Major Facility.
CITY hereby
consents to LESSEE's pledging or assigning this lease as security
HUGm THORSNESS in connection with the financing of the construction of the Major
GANTZ POWELL& BRUNDIN
Facility. Except for such pledge or assignment LESSEE shall have
!\TTnRNE:VS AT L..AW
SOl W[HTlllRlIAVENIH
ANCHORAGE,....I( 99~Ol
(907)274.7522
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ANCHORAGE. AI( 99501
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no right to sublease or assign any portion or all of the Leased
Land other than to LESSEE'S parent or another subsidiary company
of LESSEE or LESSEE'S parent without written permission of the
CITY, which permission shall not be unreasonably withheld and
provided that the sublessee or assignee meets the criteria set
forth in paragraph 15 (d) .
CITY shall have the right to refuse
permission to any other prospective sublessee or subtenant even
though such subtenant or sublessee intends to use the Leased Land
as a coal export facility, it being understood that the reputation
of LESSEE as a competent and safe operator of coal export facili-
ties is a material consideration to the CITY in permitting the
use of the Leased Land as a coal export facility.
21. LESSEE Financing
Financing of the costs of constructing the Major Facility
may entail using LESSEE'S leasehold interest in the Leased Land
as securi ty .
In such event it is understood that this lease may
have to be amended or revised to clarify the rights and obliga-
tions of CITY and LESSEE and make this lease an acceptable secur-
ity instrument.
CITY agrees to exercise good faith and all reasonable assis-
tance and to be reasonably flexible in working with LESSEE to
create an acceptable lease security instrument if such an instru-
ment is used in financing construction of the Major Facility.
22. Indemnification, Insurance and Limitation of
Liability
(a) Duty to Defend/Indemnify
Upon commencement of the ~lajor Facility construction
term and until such time as this lease is terminated LESSEE
agrees to defend, indemnify and hold the CITY harmless from
any and all claims for damages, including personal injuries
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ATTonNF.YS AT LAW
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ANCHORAGE. AK 99501
(9071214.7S22
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 sublessees, agents or contractors or the public,
except for damages arising from the sole negligence or
willful acts or omissions of CITY, its agents, employees, or
contractors.
(b) No Special Damages
However, any other terms or conditions of this lease to
the contrary notwithstanding. it is understood that in no
event shall LESSEE be liable to CITY for any special, in-
direct, incidental or consequential damages of any charac-
ter, including but not limited to loss of use of productive
facilities or equipment, lost profits, property damage, or
lost production, whether suffered by CITY or any third
party, irrespective of whether claims or actions for such
damages are based upon contract, warranty, negligence,
strict liability or otherwise.
(c) Insurance
LESSEE shall procure and maintain, at LESSEE I S sole
cost and expense, comprehensive general liability insurance,
with
limits
liability
of
Million
of
Ten
Dollars
($10,000,000.00) for all injuries and/or deaths resulting to
anyone person and Twenty Million Dollars ($20,000,000.00)
from anyone occurrence.
The limit of liability for pro-
perty
damage
shall
be
Million
Twenty
Dollars
($20,000,000.00) for each occurrence and aggregate. Cover-
age under such insurance shall also include explosion,
collapse and underground property damage hazards.
Such
insurance shall include a broadform contractural endorse-
ment.
For non-owned watercraft of LESSEE any "watercraft
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exclusion" in the comprehensive liability insurance policy
shall be eliminated.
Protection and indemnity insurance
shall be provided with the same limits as the comprehensive
liability insurance for the use of LESSEE-owned watercraft.
LESSEE shall also provide fire and extended coverage insur-
ance for any buildings, equipment, machinery or coal stored
upon the Leased Land at replacement value rather than orig-
inal cost.
The minimum amounts and types of insurance
provided by LESSEE shall be subject to revision in accor-
dance 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, inflation-
ary pressures, and other considerations, shall be utilized
in assessing whether the minimum insurance requirements
should be ,increased.
The CITY shall notify LESSEE of any
requested increase in insurance coverages at least sixty
(60) days prior to the effective date of such increases.
All insurance policies shall provide for thirty (30)
days' notice of cancellation and/or material change to be
sent to the CITY at the address designated in paragraph 43
of this lease. All such policies shall be written by insur-
ance companies legally authorized or licensed to do business
in the State of Alaska, and acceptable to the CITY (Best's
Rating A or better).
LESSEE shall furnish the CITY, on
J forms supplied by the CITY, certificates evidencing that it
has procured the insurance required herein prior to the
occupancy of the Leased Land or operation by LESSEE. Noth-
ing herein contained shall prevent LESSEE or the CITY from
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placing and maintaining at the CITY'S or LESSEE'S own indivi.~
dual cost and expense, additional or other insurance as may
be desired.
At lease annually commencing with the Major Facility
Construction Term and thereafter throughout the term of this
lease LESSEE shall procure and submit to the CITY a written
report from a reputable insurance Broker acceptable to CITY
that the Broker has reviewed the types and amounts of cover-
age of insurance obtained by LESSEE and the operations of
LESSEE and in the opinion of the Broker the coverage com-
plies with the 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
the 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 os subrogation
(whether by loan receipts, equitable assigrlInent or other-
wise), with respect to deductibles under such policies and
wi th respect to damage to equipment including the loss of
use thereof, whether insured or not. LESSEE shall also name
the 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.
23. Condemnation
I f all or any part of the Leased Land is condemned for a
public use by any government agency or other duly authorized
HUGH" THee,,'" enti ty, the CITY and LESSEE shall each make a claim against the
GArITZPOWELLIlBRU:>IDIN
ATTORNEVS AT LAW
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ANCHOR.t.GE.AK99501
{907) Z74.752Z
condemning or taking authority for the amount of any damage
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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 speci-
fic damages for loss of LESSEE'S leasehold interest, CITY shall
transmit to LESSEE the amount of such specific damages so found,
if any.
I f 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 desig-
nated for condemnation will prevent it 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, the 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 one of the terms provided for in paragraph 10.
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 in the Leased Land actual and
percentage rental payment beginning to be effective on the actual
date when LESSEE is effectively prevented from utilizing the
HUGHES THORSNESS condemned land.
GANTZPOWf;LL&BRUNDIN
ATTO,"NEVS AT lAW
~o, WEST TlllRD .vrNUf.
A'lCHORAGE.AK 9950!
(907) 27:-7522
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24. LESSEE'S Right to Terminate or Exercise of Option
to Renew
At any time prior to January I, 19B2, LESSEE has the right
to notify CITY in writing of LESSEE'S intention not to proceed
with construction of the Initial Facility.
At any time during
the Initial Term of this lease LESSEE has the right to notify
CITY in writing of LESSEE'S intention not to proceed with con-
struction of the Major Facility.
As provided in paragraph 10,
such notice by LESSEE in the case of either facility will serve
to terminate this lease and any rights and obligations of LESSEE
and CITY hereunder. In the event LESSEE so terminates this lease
CITY explicitly agrees, that but for any rental due or any there-
to fore already asserted by unresolved claims, to walve, and
hereby does waive, any and all rights or claims for damages,
expenses and/or loss it may otherwise have against LESSEE arising
out of' this lease or as a result of LESSEE exercising its right
of termination, and hereby agrees not to assert same against
LESSEE, LESSEE's parent or affiliated companies or any officers
or directors of same.
At the conclusion of the Primary Term, or the conclusion of
the Initial Option Period, if this lease is then in' effect,
LESSEE may exercise its option to renew this lease upon the same
terms and conditions (with the exception of this paragraph) for
the further lease term period provided for in paragraph 10 pro-
vided that LESSEE shall not be in default of any term or condition
of this lease and provided further that LESSEE shall have operated
the Major Facility in a normal manner for a facility of that size
given market conditions the preceding three years. The option to
HUG'" TH""'" renew shall be considered exercised by LESSEE and binding on
GANTZPOWELLllBRUNDIN
ATTO>lNEVS AT LAW
~09 "'EST TlllRtI AVENUE
ANCHORAGE. AK 99501
1907l274.7522
LESSEE and CITY unless LESSEE gives CITY written notice sent by
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A~.CHORAGE. AI( 99501
(907)274.75,22
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registered mail of its intent not to exercise an option to renew
wi thin a period of not less than one hundred and eighty (lBO)
days prior to the date that the then existing term is to expire.
25.
Arbitration
Any dispute between CITY and LESSEE with respect any provl-
sion 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 0 f such notice the other party shall give wri tten
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 designa-
tion wi thin 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 Arbitra-
tion Association.
Promptly and wi thin thirty (30) days of
concluding any proceeding the consent panel shall render its
written 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.
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(b) Formal Arbitration
If either party objects, within fifteen (IS) days
of the second party's designation of an arbitrator to
the other's choice of an arbitrator pursuant to para-
graph (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 for resolution at a neutral site outside
the states of Alaska or Utah unless the parties agree
on either state, but otherwise in accordance with the
then existing rules of the ~~erican Arbitration Associ-
ation.
(c) Arbitration Awards
Any award by either a consent panel or as a result of
proceedings before a panel pursuant to the rules of the
American Arbi tration Association shall be enforceable In
'o.'~
accordance with Alaska Statutes.
Any award may include an
award of costs, interest and attorney fees.
26. Maintenance and Repairs
During the entire 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 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.
HCGHo; THee".m CITY may periodically inspect the Leased Land and facilities
':;ANTZPO'NELLIIBRm:Dtrl
ATTC'P"EY'. "T L^'.\I
,~~,uH THIRD Ave.lIE constructed thereon in order to ascertain the condition of the
AI<CHORAGE. AI< 99501
(9071 2 7~.75l2
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GAr,TZ POWl!:llaBRUNOIN
"'TTCRNE'I'S AT l-A......
SO, WfSf TH'Il.D AVENUE
ANCHORAGE. AI< 99501
1901) Z14-15ZZ
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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.
The CITY may notify LESSEE in writing of any deficiencies in
the performance of LESSEE'S maintenance responsibilities and
LESSEE shall promptly within thirty (30) days of receipt of such
notice advise the 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 opera-
tion such that the surrounding land and port facilities are
exposed to risk unneccessary potential hazards, or a risk to the
public interest (as distinguished from a business risk) or if the
CITY lS not satisfied with the proposed schedule of repairs
either because of the delays therein or the scope of the repairs,
the CITY may engage an independent engineering consultant well
versed and experienced in bulk terminal construction, maintenance
and .epair who, shall furnish to the CITY, at LESSEE'S own cost
and expense, a comprehensive survey and report for the purpose of
establishing both the need and urgency to perform such main-
tenance work.
As soon as practicable following receipt of said
engineer's determinations and recommendations,
LESSEE shall
perform such work in accordance therewith and 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 or adjacent facilities, it may submit the matter to arbi-
tration provided, however, that pending the decision of the
arbitrators it shall fully comply with the maintenance requests.
If an arbitration award (which may include costs, interest and
atto.neys' fees) should ultimately find that the repairs were not
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necessary then LESSEE may deduct from future rental payments the
cost of such repairs.
In deciding whether repairs requested by
the CITY or required by an engineering report are necessary the
arbitration panel is to give primary consideration to the safety
and wel fare of the Seward port facilities and the citizens of
Seward such that the highest standards of industrial and environ-
mental safety are achieved.
LESSEE has reviewed the preliminary engineering design
specifications for the port of Seward facilities to be con-
structed at the 4th of July Creek site of which the Leased Land
is a portion.
If any facility or service provided by the CITY shall become
inadequate due to changes in environmental control standards or
should any facility require updating or improvement by reason of
a change in LESSEE'S use of the Leased Land or operations there-
from, LESSEE shall either construct such improvements at LESSEE'S
own cost or reimburse the CITY for such work at the option of the
CITY.
It lS the intent of this provision to alleviate from the
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.
27. Fire Protection
LESSEE shall at its sole cost, risk and expense provide
protection to the Leased Land and fire prevention for adj acent
port facilities such that risks to the adj acent public port
facilities and the public are minimized. The parties agree that
wi th the rapid expansion of technology in the field of fire
Huo"" T"""", prevention and control at coal exporting facilities LESSEE'S
:;ANTZ POWEll.!: BRUNDIN
obligations hereunder will vary during the term of this lease.
ATTOf./NEVS "T LAW
5 0 g '" (Sf T H I R 0 A Y r ~. u [
Ar ~ C H 0 R^ G E. A I( 9950 1
(~071 274-752.2
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GANTZ PO\~ELL,BRU"'OIN
ATTORi'lCY!', AT lAW
~O, w~n lNI~O AVErill[
ANCfIORAGE. All( 99501
(9071,274.752:2
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The CITY may submit to arbitration not more frequently than once
each five years, the issue of whether LESSEE has continued to
provide and maintain state of the art fire protection.
28. Estoppel Certificates
Ei ther party shall at any 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), that there are
not 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.
29. 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 in each separate
provision.
30. 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 condi-
tion 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.
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31. Time of Essence
Time is of the essence of this lease and of each provision.
32. Computation of Time
The time In which any act provided by this lease is to be
done by shall be computed by excluding the first day and includ-
ing the last, unless the last day is a Saturday, Sunday or a
holiday, and then it is also excluded.
33.
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.
34. Entire Agreement
This lease contains the entire agreement of the parties with
respect to the matters covered by this lease, and no other agree-
ment, statement or promise made by any party which is not con-
tained in this lease shall be binding or valid.
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35.
Governing Law
This lease shall be governed by, construed and enforced in
accordance with the laws of the State of Alaska.
36. Partial Invalidity
If any provision of this lease is held by a court of compe-
tent 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.
37. Relationship of Parties
Nothing contained ln 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
HUG"" T"o",,," of any association between CITY and LESSEE; and neither the
GANTZ POWELLlI: BRUNDI1l
f.TTO,NEYS ....T LA','I
S01 ... f Sf THIRD AVlN U ~
At~CH()kAGE. AK 9950 t
190])274_7522
method of computation of rent, nor any other provisions contained
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In this lease nor any acts of the parties, shall be deemed to
create any L'eliltionship between CITY and LESSEE other than the
relationship of LESSEE and CITY.
38. 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 reviewing this lease.
39. 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 associa-
tion wherever the context so requires.
40. Mandatory and permissive
"Shall", "will" and "agrees" are mandatory; "may" is permis-
sive.
41. 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 provi-
sions of this lease.
42. Amendment
This lease is not subj ect to amendment except in writing
executed by both parties hereto.
43. 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
"'T"T::ii>.W:YS"'T t....w
~ 0' ....r 51 I HIRD AV[I, I' r
Hoo,"" THO"N'" registered, postage prepaid, to the addresses stated in this
~A.';TZ POWELL&BRUNDIN
A~C:HOilAGE. Ak 99501
1907\274.752'2
paragraph and shall be deemed to have been given at the time of
delivery or mailing.
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":;MHZ POl'.'l:.LLfI;BRUNDIN
ATTO"NEY5 AT LAW
~09 VJfST TIIIll.O ,lVU.UE
Ar,CHORAGE. AK 99501
(9071274.7SZZ
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44. Notices
All notices, demands and requests from LESSEE to CITY shall
be glven to CITY at the fOllowing address:
City Manager
city of Seward
P.O. Box l67
Seward, Alaska 99664
All notices, demands or requests from CITY to LESSEE shall
be glven to LESSEE at the following address:
Torkelson-Kellogg, Inc.
5077 West Wiley Post Way
Salt Lake International Center
Salt Lake City, Utah B4116
Attention:
45. Change of Address
Each party shall have the right, from time to time, to
designate a different address by notice glven in conformity with
this paragraph.
IN WITNESS WHEREOF, the parties hereto have set their hands
and seals the date first hereinbefore set forth.
CITY:
CITY OF SEWARD
By:
Mayor
ATTEST:
Clty Clerk
LESSEE:
TORKELSON-KELLOGG, INC.
By:
Its:
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GAr; Tl Pow[lLaBnUNDIN
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ANCHORAGE. AI': 99501
190]) 27-1.7522
.-~
STATE OF ALASKA
THIRD JUDICIAL DISTRICT
THIS IS TO CERTIFY that on this day of
19BI, before me, the undersigned a Notary Publlc in and for th~
State of Alaska, personally appeared RAYMOND HUGLI, known to me
and to me known to be the NAYOR of the CITY OF SEWARD, and known
to be the individual named in and who executed the foregoing
document and he acknowledged to me that he was authorized to
execute the foregoing document by authority granted him in the
Charter and Ordinances of said City for the uses and purposes
therein set forth.
WITNESS my hand and notarial seal the day and, year first
hereinabove written.
Notary Publle In and for Alaska
My Commission Expires:
STATE OF UTAH
COUNTY OF SALT LAKE
THIS IS TO CERTIFY that on this day of
1981, before me, t,he undersigned, a Notary Public in and for th~
State of Utah, personally appeared
the of TORKELSON-KELLOGG, INC., and known to be
the ~ndlvldual named in and who executed the foregoing document
and he acknowledged to me that he was authorized to execute the
foregoing document by authority granted him in the Bylaws or by
Resolution of the Board of Directors of said corporation for the
uses and purposes therein set forth.
WITNESS my hand and notarial seal the day and year first
hereinabove written.
Notary Publlc In and for Utah
My Commission Expires:
-42-
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LEGAL DESCRIPTION
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A TRACT OF LAND LOCATED IN FRACTIONAL SECT. 13, T.I S., R.I W.,
AND FRACTIONAL SECT. 18, T.l S., R.l E., SEWARD MERIDIAN, THIRD
JUDICIAL DISTRICT, ALASKA, DESCRIBED AS THE SOUTH 1150.00 FT.
OF U.S. SURVEY 4828 AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
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BEGINNING @ CORNER NO.5 OF SAID U.S. SURVEY 4828, WHICH IS
THE TRUE POINT OF BEGINNING; THENCE S 89025'47" W
A DISTANCE OF 3681.48 FT. ALONG THE SOUTH BOUNDARY
TO CORNER NO. 5 OF SAID SqRVEY; THENCE ALONG THE ORIGINAL
MEANDER N 18007'59" W A DISTANCE OF 813.12 FT. TO AN ORIGINAL
MEANDER CORNER; THENCE ALONG AN ORIGINAL MEANDER N 36054'01" E
A DISTANCE OF 472.21 FT. TO A POINT; THENCE N 89025'47" E
A DISTANCE OF 3636.58 FT. TO A POINT OF INTERSECTION ON THE
EAST BOUNDARY OF U.S. SURVEY 4828; THENCE ALONG SAID E. BOUNDARY
S 0043'09" E A DISTANCE OF llSO.OO FT. TO THE TRUE POINT OF
BEGINNING.
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THIS TRACT INCLUDES 100.21 ACRES, MORE OR LESS.
THIS TRACT SHALL INCLUDE TWO RIGHT-OF-WAY EASEMENTS AS FOLLOWS:
THE SOUTH 100 FT. OF SAID TRACT SHALL BE RETAINED BY THE OWNER
AS A PERMANENT ACCESS EASEMENT; AND THE DEDICATED PUBLIC ACCESS
RIGHT-OF-WAY FOR THE NASH ROAD EXTENSION.
BEARINGS AND DISTANCES ARE GRID BASED ON GEOGRAPHIC POSITION,
ALASKA ZONE FOUR.
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