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HomeMy WebLinkAboutRes1994-106 . . . Sponsored by: Tones CITY OF SEWARD, ALASKA RESOLUTION NO. 94-106 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, APPROVING LEASE AGREEMENT NO.3 WITH SEWARD FOREST PRODUCTS WHEREAS, the City of Seward (City) agreed to lease to Chugach Alaska Corporation (Former Lessee) approximately 30.7 acres of property (Adjacent Leased Land) located within the Seward Marine Industrial Center; and WHEREAS, the City agreed to lease to Former Lessee approximately 4.68 acres of property adjacent to the Adjacent Leased Land effective June 1988 (Lease No.2); and WHEREAS, City has constructed public port facilities in proximity to the Leased Land and the City Council of the City of Seward has determined that a lease of the Adjacent Leased Land is in the public interest as set forth more fully in Resolution No. 88-007 of the City of Seward; and WHEREAS, Former Lessee indicated a desire to lease an area of approximately 8.13 acres in size (Leased Land) immediately to the north of the Adjacent Leased Land; and WHEREAS, the City Council of the City of Seward determined that a lease of the Leased Land would be in the public interest in tat it would promote the development of the Adjacent Leased Land by Former Lessee which in turn would provide employment opportunities within the City of Seward and promote the growth and stability of the economy of Seward; and WHEREAS, Former Lessee executed a lease with the City for the Leased Land effective June 1989 (Prior Lease); and WHEREAS, it was the intent of the Prior Lease and is the intent of this Lease to alleviate the City from the entire burden of compliance with present or future environmental regulations or controls with respect to Lessee's operations on the Leased Land during the lease term; and WHEREAS, Former Lessee filed a Petition for Chapter 11 Reorganization in the United States Bankruptcy Court for the District of Alaska on March 11, 1991; and WHEREAS, the Bankruptcy Court approved a Second Amended Joint Chapter 11 Plan of Reorganization and approved the sale and transfer of the Former Lessee's interest in the improvements on the Leased Land and its leasehold interest to Seward Forest Products (Lessee), by order and judgment of the Bankruptcy Court dated December 17, 1992; and SEWARD FOREST PRODUCTS LEASE NO.3 January 1993 . DRAFT 07/26/93 BEM/pll Revision #0 TABLE OF CONTENTS Paqe ARTICLE 1. LEASED LAND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE 2. EASEMENTS, UTILITIES AND PERMITS .................... 7 ARTICLE 3. CONSTRUCTION BY LESSEE . . . . . . . . . . . . . . . . . . . . . . . . . . .. 11 ARTICLE 4. LEASE TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 12 ARTICLE 5. RENT ............................................. 13 ARTICLE 6. REDUCTION OR WAIVER OF RENT ....................... 14 ARTICLE 7. USE OF LEASED LAND ................................ 17 . ARTICLE 8. RETURN OF LEASED LAND/SITE CONDITIONS .............. 19 ARTICLE 9. FORCE MAJEURE .................... . . . . . . . . . . . . . . .. 20 . ARTICLE 10. CITY BREACH OF ITS OBLIGATION ...................... 20 ARTICLE 11. REMEDIES FOR CITY'S ACTS OF DEFAULT ................ 21 ARTICLE 12. LESSEE BREACH OF ITS OBLIGATION. . . . . . . . . . . . . . . . . . .. 23 ARTICLE 13. REMEDIES FOR DEFAULT BY LESSEE. . . . . . . . . . . . . . . . . . .. 24 ARTICLE 14. TITLE TO IMPROVEMENTS INSTALLED BY LESSEE .......... 27 ARTICLE 15. SUBLEASE OR ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . .. 27 ARTICLE 16. LESSEE'S DUTY TO DEFEND/INDEMNIFY ................. 29 ARTICLE 17. CITY'S DUTY TO DEFEND/INDEMNIFY. . . . . . . . . . . . . . . . . . .. 29 ARTICLE 18. INSURANCE ....................................... 29 SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 2 . , . DRAFT 07/26/93 BEM/pll Revision #0 ARTICLE 19. CONDEMNATION.................................... 32 ARTICLE 20. ARBITRATION .............................. -' . . . . .. 33 ARTICLE 21. MAINTENANCE AND REPAIRS. . . . . . . . . . . . . . . . . . . . . . . . .. 34 ARTICLE 22. ENVIRONMENTAL CONCERNS. ......................... 36 ARTICLE 23. FIRE PROTECTION .................................. 41 ARTICLE 24. ARTICLE 25. ARTICLE 26. ARTICLE 27. . ARTICLE 28. . ARTICLE 29. ARTICLE 30. ARTICLE 31. ARTICLE 32. ARTICLE 33. ARTICLE 34. ARTICLE 35. ARTICLE 36. ARTICLE 37. ARTICLE 38. . ESTOPPEL CERTIFICATES. . . . . . . . . . . .. . . . . . . . . . . . . . . .. 41 CONDITIONS AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . .. 42 NO WAIVER OF BREACH... .. .. . . . . . . . . . . . ............ 42 TIME OF THE ESSENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 42 COMPUTATION OF TIME .... . . . . . . . . . . . . . . . . . . . . . . . . .. 42 SUCCESSORS IN INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . .. 43 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 43 GOVERNING LAW ................................... 43 PARTIAL INVAUDI1Y ...............~.................. 43 RELATIONSHIP OF PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . .. 43 INTERPRETATION ................................... 44 NUMBER AND GENDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 44 MANDATORY AND PERMISSIVE. . . . . . . . . . . . . . ...... ...... 44 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 44 AMENDMENT ...................................... 44 SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11 C Page 3 . . . DRAFT 07/26/93 BEM/pll Revision #0 ARTICLE 39. DELIVERY OF NOTICES - METHOD AND TIME .............. 45 ARTICLE 40. NOTiCES.......................................... 45 ARTICLE 41. CHANGE OF ADDRESS ............................... 45 SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 4 . DRAFT 07/26/93 BEM/pll Revision #0 LEASE AGREEMENT THIS AGREEMENT effective as of the 1st day of January 1993, by and between the CITY OF SEWARD, ALASKA, a municipal corporation located in the Kenai Peninsula Borough, State of Alaska, hereinafter referred to as "CITY" and SEWARD FOREST PRODUCTS, a joint venture comprised of Chugach Forest Products, Inc., Young & Morgan North, Inc., and Citigreen, Inc., hereinafter referred to as "LESSEE". WHEREAS, CITY agreed to lease to Chugach Alaska Corporation ("Former Lessee"), 30.7 acres, more or less, of properties within the boundary limits of the City of Seward, Alaska, hereinafter referred to as the "Adjacent Leased Land" effective January . 11,1988; and, WHEREAS, CITY agreed to lease to Former Lessee, 4.68 acres, more or less, of. property adjacent to the Adjacent Leased Land effective June 1988, hereinafter referred to as "Lease No.2". WHEREAS, CITY has constructed public port facilities in proximity to the Adjacent Leased Land and the City Council of the City of Seward has determined .that the lease of that land is in the public interest all as set forth more fully in Resolution 88-007 adopted by the City Council of the City of Seward, Alaska; and . . . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 5 . . . DRAFT 07/26/93 BEM/pll Revision #0 WHEREAS, Former Lessee indicated its desire to lease an area of approximately 8.13 acres in ;;lze, hereinafter called the "Leased Land" immediately to the north of the Adjacent Leased Land; and ,'/UCQC ^ C >10.<:> C:." CO' 'ne;1 of the C:"y Of Cc",~rrl .../ct<:>rm'tr.orl that a leas'" of tho ..IIL....'L....I""\V,Lilv ILl ..... It IL ,'--'v.,c:;...__............I.. ............ ...... ~..- Leased Land would be in the public interest in that it would promote the development of the Adjacent Leased Land by Former Lessee which in turn would provide employment opportunities within the City of Seward, and promote the growth and stability of the economy of Seward; WHEREAS, Former Lessee did in fact execute a lease with CITY for the Leased Land effective June 1989 ("Prior Lease"); WHEREAS, it was the intent of the Prior Lease and is the intent of this Lease to remove from CITY the entire burden of compliance with present or future environmental. regulations or controls with respect to the Former Lessee's or LESSEE's operations on the Leased Land during the lease term; and WHEREAS, Former Lessee along with Chugach Rsheries, Inc., Chugach Forest Products, Inc., and Chugach Timber Corporation filed a Petition for Chapter 11 Reorganization in the United States Bankruptcy Court for the District of Alaska on March 11, 1991, Case No. 91-00207 -3-DMD, Jointly Administered; and Wl-!EREAS, the Bankruptcy Court approved a Second Amended Joint Chapter 11 Plan of Reorganization and later approved the sale and transfer of the Former Lessee's SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 6 . DRAFT 07/26/93 BEM/pll Revision #0 interest in the improvements on the Leased Land and its leasehold interest to LESSEE, Sewaid :=Ciast Prcducts, by order and judgment of the Bankruptcy Court dated December 17, 1992; and WHEREAS, LESSEE and CITY desire to provide for the continued use and development of the Leased Land by the LESSEE in continuance of CITY's above-stated objective to promote economic development and employment in the community; and WHEREAS, LESSEE and CITY on the terms more fully set forth below, agree to terminate the Prior Lease and enter into a new lease (this "Lease") covering the Leased Land. NOW THEREFORE, for and in consideration of the mutual promises and covenants . hereinafter contained, the parties hereto agree as follows: ARTICLE 1. LEASED LAND. The Leased Land consists of approximately 8.13 acres, more or less, situated in that tract of land located in fractional Section 13, T1S, R1W, Seward Meridian, Third Judicial District, Alaska, and outlined in red on the attached Exhibit A which is incorporated herein by reference. 1.1 Survey of Leased Land. Exhibit B consists of a real property description based on a survey prepared by the CITY and is incorporated herein by reference. This real prop~ description shall be considered the correct description of the Leased Land for all purposes under this Lease. . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 7 . DRAFT 07/26/93 BEM/pl! Revision #0 -1.2 Platting. CITY intends to re-plat the Seward Marine Industrial Center on a P6iiccic basis in order to ensure the orderly development of the propert'j 2.!1d 2.S leases are entered into with various tenants. CITY agrees to include the Leased Land in the next re-plat of the Seward Marine Industrial Center in accordance with the description contained in Section 1.1 above. If LESSEE requires a plat of the Leased Land prior to that time, LESSEE may request an earlier re-plat and, upon request, CITY shall assist LESSEE in the preparation and filing of a re-plat of the Leased Land. If LESSEE requests a special re-plat LESSEE shall reimburse CITY for the CITY's direct costs in assisting in the preparation and filing of that re-plat LESSEE agrees to sign the plat and any documents necessary to complete the platting or re-platting of the land including the . Leased Land. 1.3 Warranty of Title: Covenant of Quiet Enjoyment Subject only to restriction~ 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 for the full term of this Lease. CITY owns the Leased Land free and clear of all encum- brances and is fully empowered to enter into this Lease. CITY is unaware of any prior conflicting use of the Leased Land which would adversely affect LESSEE's intended use of the Leased Land. This warranty of title is subject to correct delineation of State of Alaska-owned tidelands boundaries. . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 8 . DRAFT 07/26/93 BEM/pll Revision #0 -ARTICLE 2. EASEMENTS, UTILITIES AND PERMITS. 2.1 Extension of Utilities. LESSEE, at LESSEE's sole cost and expense, shall provide for the extension of public utilities to the Leased Land necessary for LESSEE's intended operations. In so doing, LESSEE shall comply with all City regulations and requirements with respect to the construction of those utilities. CITY agrees to cooperate and assistthe LESSEE in LESSEE's planning and engineering ofthose improvements and further to assist in coordinating the actual connection of those utilities to the City system. 2.2 Petitions for Zoning. CITY represents that the current zoning classification of the Leased Land is Industrial. In the event that at any time LESSEE deems it necessary or appropriate to obtain use, zoning or subdivision and precise plan approval 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 from the agency or public body responsible therefor any conditional use permits, zoning and re-zoning, tentative and final tract approval and precise plan approval. This paragraph shall impose no duty or responsibility on the City to.assist LESSEE in obtaining any other permits or approvals for operation or construc- tion, such as those required by the U.S. Army Corps of Engineers (wetland fill permits) or the Environmental Protection Agency (Clean Air Act permits), etc. : . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 9 . DRAFT 07/26/93 BEM/pll Revision #0 .. 2.3 Permits. CITY shall cooperate in good faith with LESSEE in LESSEE's efforts to promptly obtain any required permits for construction or operation of LESSEE's facilities on the Leased Land. LESSEE shall not be entitled to any refund, reb:::t8, or payments from CITY for any rent, investment, or costs incurred by LESSEE with respect to any required permits for construction or operation of LESSEE's facilitates on the Leased Land, it being the intent of the parties that the risk of obtaining required permits be solely a risk undertaken by LESSEE 2.4 Third Party Improvements. 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 in accordance with the terms of this Lease covenants, conditions and restrictions providing for the granting of 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 (herein called "third-party improvements"), all of which are for the purpose of the orderly development of the Leased Land as a commer.cial unit subject, however, to the conditions that: a) All such matters shall be limited to the lease term and shall terminate upon terlJlination of this Lease for whatever reason. . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 10 . DRAFT 07/26/93 BEM/pll Revision #0 b) Any such matters of a permanent nature extending beyond the lease term shall not be granted without the prior written approval of CllY. In any of the foregoing instances referred to in this paragraph 2.4, CllY shall be without expense therefor, and the cost and expense thereof shall be borne solely by LESSEE. c) At the expiration of the lease term (including any extended period) third party improvements on the Leased Land other than portable. equipment shall become the property of CllY without the payment of any compensation to LESSEE. 2.5 Future Easements. In order to provide for the more orderly commercial development of the Leased Land and adjacent lands, including the Adjacent Leased Land, and publicly owned facilities at the Seward Marine Industrial Center, it may be necessary, . desirable or required that street, railroad, 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 CllY 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; provided, however, that such eas~ments and dedications and similar rights do not unreasonably interfere with LESSEE's efficient operations. The costs of locating or relocating any public easements . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 11 . DRAFT 07/26/93 BEM/pll Revision #0 or restrictions of record including any relocation of public road, railroad, utili!'}, or other easements shall be at the sole cost and expense of the party requesting the relocation. CITY shall not refuse reasonable requests for such relocations provided those relocations 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 CITY need not be exclusive to LESSEE. 2.6 Interim Right to Possession. The parties understand, and LESSEE is specifically taking the risk, that under the Charter and Ordinance provisions for the City of Seward, this Lease may be voided by a referendum vote of the people, and that the grant to LESSEE of the right to possession of the Leased Land prior to the passage of . thirty (30) days from the date of approval of this Lease by the City Council of the City of Seward shall in no way affect or reduce the rights of the voters to reject this Lease, in. which case LESSEE shall not be entitled to any damages, or any other recovery against CITY. Permitting LESSEE to occupy the Leased Land in advance of the lapse of thirty (30) days is for the convenience of LESSEE only and should not be construed as granting any interest in the Leased Land should this Lease be defeated in a referendum election. ARTICLE 3. 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, subject to the following conditions: . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 12 . DRAFT 07/26/93 BEM/pll Revision #0 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. c) LESSEE 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 Fifty Thousand Dollars ($50,000). 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. In the event that LESSEE elects to construct the facility with its own personnel and equipment, or the personnel and equipment of any corporation or person that is an "affiliate" of LESSEE as such term is defined in A.S. 10.06.990(2), a performance bond shall be required when the cost of the work is over Rfty Thousand Dollars ($50,000). e) CITY may, as contemplated by Alaska Statutes, give notice of non- responsibi!ity for any improvements constructed or effected by LESSEE on the Leased Land. . SEWARD FOREST PRODUCTS lEASE NO.3 AMMOO11C Page 13 . DRAFT 07/26/93 BEM/pll Revision #0 f) LESSEE shall comply with all federal, state and local statutes and regulations with respect to such construction including any required finding by the City Council of Seward that such action is in the public interest. g) LESSEE may add/alter, or remodel improvements at LESSEE's discretion during the term of this Lease. ARTICLE 4. LEASE TERM. 4.1 Initial Term. The initial term of this Lease shall be for a period of approximately fifteen years and one and one-half months, commencing on January 1, 1993, and ending on February 15, 2008. 4.2 Options to Renew. LESSEE shall have the right to extend the initial term of . this Lease for four additional five-year periods (cumulative extensions not to exceed 20 years), called the first, second, third and fourth option terms, provided: a) That LESSEE exercises any applicable option to renew at least one hundred and eighty (180) days prior to the expiration of the current lease term; b) That LESSEE is not in default in any term or condition of this Lease and has not made an assignment of this Lease without the written permission of CITY as set forth in Article 15 of this Lease; c) That LESSEE shall exercise its options to renew by sending written notice thereof in accordance with the provisions of Article 39 of this Lease; and . . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11 c Page 14 . DRAFT 07/26/93 BEM/pH Revision #0 d) That the City Council, at the time each option is exercised, approves the extension by Resolution or Ordinance. ARTICLE 5. RENT. 5.1 Initial Rental Rate. For the first five (5) years of this Lease, the annual rental rate shall be established by an appraisal of the Leased Land at fair market value. This initial appraisal is to be completed by the City within ninety. (90) days of the approval of this Lease by the City Council for the City of Seward or as soon as practicable thereafter. The procedures described in paragraphs 5.2 and 5.3 shall govern the appraisal to establish the initial rental rate. The rent shall be paid in each year in equal installments on or before the fifteenth day of February, and the fifteenth day of August. The . anniversary date of this Lease shall be January 1 of each year. For purposes of computing rent, the parties agree that the Leased Land contains square feet o~ area. 5.2 Rental Adjustments. Not more than ninety (90) days before the fifth anniversary date of this Lease, and once every five years thereafter, the total annual rental to be paid under the terms of this Lease shall be adjusted to the fair market value at the highest and best use of the Leased Land, exclusive of improvements placed thereon by LESSEE but inclusive of all improvements made by CllY (including those made before or subsequent to this Lease). As an aid to future appraisals the parties have attached a photographic record collectively referenced to as Exhibit C demonstrating the condition . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11 C Page 15 . . . DRAFT 07/26/93 BEM/pll Revision #0 of the -Leased Land prior to this Lease and the Prior Lease. CITY shall, at its own expense, retain an appraiser who shall determine the annual rental rate at the fair market value at the highest and best use of the Leased Land, without consideration to LESSEE's intended or actual use of the Leased Land unless that use is coincidentally the highest and best use of the Leased Land. 5.3 Procedure for Rental Adjustment. If LESSEE objects to the appraiser's determination of the fair market rental value within thirty (30) days of receipt of the report, it shall give written notice of its objection and the LESSEE shall then engage a second independent MAl certified appraiser at its expense to make a second appraisal of the fair market rental value as set forth in Section 5.2 above. If the second appraisal reflects a fair market rental value which varies from the first appraisal by no more than ten percent (10%), then the two appraisal values shall be. averaged. If the second appraisal reflects a fair market rental value which varies from the first appraisal by more than ten percent (10%) then, unless CITY and LESSEE agree on a value themselves, the fair market rental value of the Leased Land shall be determined in accordance with the arbitration provisions contained in ARTICLE 20 of this Lease. ARTICLE 6. REDUCTION OR WAIVER OF RENT. One of the primary reasons for the CITY's approval of the Prior Lease with the Former L~ssee was the commitment of Former Lessee to provide employment opportunities in Seward and the development of a beneficial new industry-namely a forest SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11 C Page 16 . DRAFT 07/26/93 BEM/pll Revision #0 products manufacturing facility on the Adjacent Leased Land. As an incentive to provide for continued investment at the Seward Marine Industrial Center and employment opportunities within the City of Seward, LESSEE shall be entitled to a reduction or waiver of rent under the following conditions: 6.1 Rent Reduction. For the first five years of the lease term, the annual rental rate to be paid by LESSEE to CllY shall be an amount equal to one-half of the fair market rental rate established by Article 5. In order to be eligible for the reduction of rent under this Article, LESSEE must have operated during the preceding calendar year a forest products manufacturing facility on the Adjacent Leased Land. The calendar year beginning January 1, 1997, is the last year for which rent may be reduced under this . Article. 6.2. Waiver of Rent. a) Provision of Employment. For the first five years of the lease term, rent shall be waived by CllY for any calendar year if the operation of the Sawmill on the Adjacent Leased Land employed 25,000 or more man-hours of labor during the immediately preceding calendar year. The calendar year beginning January 1, 1997, is the last year for which rent may be waived under this Article. If the sawmill fails to employ at least 25,000 man-hours of labor during any calendar year between January 1, 1993, and December..31, 1900, LESSEE shall pay CITY the reduced rent for the following calendar year in an amount equal to one-half of the fair market rental rate established by Article 5. . SEWARD FOREST PRODUCTS lEASE NO.3 AMMOO11 c Page 17 . DRAFT 07/26/93 BEM/pll Revision #0 b) Year 1 Waiver. Notwithstanding the labor requirements of 25,000 man-hours, ia..~ ~Gi the year 1993 is waived by CITY. However, the provision of 25,000 man-hours during 1993 is necessary for LESSEE to obtain the rent waiver for the following year. c) Waiver Requirements. In order to be eligible for the waiver of rent under this Article, LESSEE must have operated during the preceding calendar vear a forest products manufacturing facility on the Adjacent Leased land and, provided employment at the sawmill on the Adjacent Leased land during the preceding calendar year at a level equal to 25,000 man-hours. CITY shall have the right to verify LESSEE's compliance with the provisions of this Article by being provided quarterly certified payroll records showing the hours worked at the sawmill on the Adjacent Leased Land. This waiver of rent is only . available during the first five years of the lease term. 6.3 Illustration No.1. As a further illustration of the mechanism contemplated by . this Article, the following example is given: a) lease term commences January 1, 1993. b) by December 31, 1993, LESSEE has provided 25,000 or more man-hours of labor or more during the 1993 calendar year. Under this set of facts, LESSEE would be entitled to a waiver of rent otherwise due for the year 1994. If the 25,000 man-hours of work is also met during 1994, LESSEE would receive a like waiver of rent for the year 1995. SEWARD FOREST PRODUCTS lEASE NO.3 AMMOO11C Page 18 . . . DRAFT 07/26/93 BEM/pll Revision #0 6.4 Illustration No.2. As a further illustration of the mechanism contemplated by this Article, the following example is given: a) lease term commences January 1, 1993. b) by December 31, 1993, LESSEE has not provided 25,000 man-hours of labor during the 1993 calendar year. Under this set of facts, LESSEE pays no rent for 1993, because rent for year one was waived regardless of the man-hours of labor provided during the first year. However, because the employment requirement was not met during 1993, rent is to be paid for 1994 in an amount equal to one-half of the fair market rental rate established by Article 5. This rent amount is to be paid in two equal installments on February 15, and August 15, 1994. If the employment requirement is met during the year beginning January 1, 1994, then rent otherwise due on February 15 and August 15, 1995 will be waived. 6.5 Illustration No.3. As a further illustration of the mechanism contemolated bV this Article the following example is given: a) year 4 of the lease commences on January 1, 1996. b) by December 31, 1996, LESSEE has provided 25,000 or more man-hours of labor during the 1996 calendar year. Under this set of facts, LESSEE pays no rent for 1997, year 5 of this'Lease, the final year .Jar which rent may be waived. Even if LESSEE provides 25,000 man-hours of labor during year 5 ending December 31,1997, no waiver of rent can be earned for 1998 SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 19 . DRAFT 07/26/93 BEM/pll Revision #0 or any subsequent year. The reduced rate of half the fair market value is also not available for 1998 or any subsequent year. The full fair market rental rate as determined and periodically adjusted under Article 5 is to be paid for 1998 and all subsequent years. ARTICLE 7. USE OF LEASED LAND. LESSEE may use the Leased Land for any lawful use. 7.1 No Preferential Rights to Use Public Facilities. This Lease shall not be construed to grant any exclusive rights of use to LESSEE of any public port facilities constructed or maintained by the City of Seward. Insofar as use of those facilities is concerned, LESSEE will be subject to any required tariffs, procedures, rules and regulations of the City of Seward as they may now exist or from time to time be amended . and LESSEE shall not be entitled to any exclusive use. 7.2 Other Users of Seward Marine Industrial Center. This Lease 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 Leased Land should this Lease be terminated for any reason. 7.3 Adequacy of Public Facilities. 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 u~s intended by LESSEE, and LESSEE has inspected those facilities and has examined the plans and specifications of those facilities under construction or planned for . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO1'C Page 20 . DRAFT 07/26/93 BEM/pll Revision #0 construction and has satisfied itself that the facilities are sufficient for the intended uses by LESSEE. CITY makes no representations or warranties of any nature with respect to the commercial practicability or accuracy of any information provided by CITY. LESSEE has independently conducted its own review, investigation, and assessment. The parties recognize that CITY has provided information to LESSEE for LESSEE's convenience and neither party intends the CITY or its agents (including Peratrovich, Nottingham and Drage, Inc.) to be responsible for any errors or omissions or misrepresentations therein short of actual fraud. 7.4 Tariffs and Other Service Fees. CITY shall have the right to make amend- ments to its tariffs, regulations and scheduled fees from time to time 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 impose any greater burden or higher rate. upon LESSEE than upon any other similar user of the public facilities. 7.5 Time for Payment of Utilities and Taxes. LESSEE will pay for utilities and taxes related to operations on the Leased Land and LESSEE's interest in this Lease, if any, before such obligations become delinquent; provided, that LESSEE may, in good faith and before such delinquency, contest any such charge or assessment. - . . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11 C Page 21 . DRAFT 07/26/93 BEM/pll Revision #0 -ARTICLE 8. RETURN OF LEASED LAND/SITE CONDITIONS. 8.1 Return of Leased Land in Oriqinal Condition. Upon termination of this Lease for any reason except for the termination by expiration of the lease term or renewals thereof, LESSEE shall return the Leased Land to CITY in the same condition as at the commencement of this Lease, ordinary wear and tear excepted. The Leased Land shall be free of all Hazardous Materials arising out of or resulting from LESSEE's or Prior Lessee's operations. 8.2 Return of Leased Land in Different Condition. Notwithstanding the provisions of Section 8.1 above, upon termination of this Lease for any reason LESSEE may return the Leased Land in a re-contoured or graded condition different from its original condition . provided LESSEE has complied with the following provisions: a) CITY has provided written approval of LESSEE's plans for developmen~ of the Leased Land contours, including its plans for material extraction and final grade, and b) CITY has had the opportunity to comment upon LESSEE's plans and to require LESSEE to make reasonable changes in them in order to provide reasonable assurance that the extraction of materials, contouring, and grading will not adversely affect the ability of CITY to lease the Leased Land for commercial development should this Leas~ terminate for any reason and to avoid interference with other port operations, and . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 22 . DRAFr 07/26/93 BEM/pll Revision #0 c) The exercise of these rights to review shall not imply any obligation to do so nor any obligation to do so in a particular way, and d) LESSEE shall submit a preliminary design to CITY within sixty (60) days after execution of this Lease, and shall finalize that design within sixty (60) days after receiving CITY's comments. LESSEE shall comply with the final design specifications as approved by CITY. CITY's engineer may monitor the work and shall have access to the Leased Land at all reasonable times for that purpose. ARTICLE 9. FORCE MAJEURE. In the event either LESSEE or CITY is delayed from performance of any of its obligations under this Lease, due to acts of God, acts of the enemies of the United States . of America, sabotage, war, blockade, insurrection, riot, epidemic, fire, flood, explosion, earthquake/tsunami, civil disturbance or war, the time period wherein such performanc~ is to occur shall be extended by that amount of time necessary to compensate for the delay. ARTICLE 10. CITY BREACH OF ITS OBLIGATION. Each of the following shall be a "CITY Act of Default" under thj~ Lease and the terms "acts of default" and "default" shall mean, when they are used in this Lease, any one or more of the following events: : a) Failure by CITY to fulfill, observe or perform any covenants or agreements on its part to be observed or performed under this Lease for a period of thirty (30) days . SEWARD FOREST PROOUCTS LEASE NO.3 AMMOOl tC Page 23 . DRAFT 07/26/93 BEMjpll Revision #0 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 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, the State of Alaska, the Kenai Peninsula Borough, or the City of Seward 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. Furthermore, if CITY shall contest such alleged violation through appropriate judicial or administrative channels, the time period specified herein shall not commence until such proceedings are finally determined, provided such proceedings are diligently pursued. ARTICLE 11. REMEDIES FOR CITY'S ACTS OF DEFAULT. Wh?never 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 . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 24 . DRAFT 07/26/93 BEM/pll Revision #0 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 rent 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. 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, 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, 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 ~ther rights or remedies provided for in this Lease, now or thereafter existing at law or in equity or by statute or otherwise. . SEWARD FOREST PRODUCTS lEASE NO.3 AMMOO11C Page 25 . . . DRAFT 07/26/93 BEM/pll Revision #0 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. ARTICLE 12. LESSEE BREACH OF ITS OBUGA TION. 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 la~er than twenty (20) days from the due date thereof, the rent required to be paid under this Lease. b) Failure by LESSEE to observe, fulfill or perform any covenants, conditions or agreements on its part to be observed or performed under this Lease for a period of 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 benefrt: 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 SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11G Page 26 . DRAFT 07/26/93 BEM/pll Revision #0 trustee for itself or for any substantial part of its property; or the commencement of any proceeding relating to LESSEE under any bankruptcy, insolvency, reorganization, arrangement or readjustment of debt law or statute or similar law or statute of any jurisdiction, whether now or hereafter in effect which shall remain undismissed for a period of six (6) months from the date of commencement thereof. d) 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. Furthermore, if LESSEE shall contest such alleged violation through appropriate judicial or administrative channels, the time period specified herein shall not commence until such proceedings are finally determined provided such proceedings are diligently pursued; provided, however, that any such extension of time shall not be effective if the effect of the interim administrSitive or judicial action is to cause a stoppage, interruption or threat to the activities of any person or entity other than those of LESSEE. . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 27 . . . DRAFT 07/26/93 BEM/pll Revision #0 e) The default by LESSEE or any other lease agreement between LESSEE and CITY. ARTICLE 13. REMEDIES FOR DEFAULT BY LESSEE. Whenever an act of default by LESSEE shall have occurred, and any applicable period for giving notice and any opportunity to cure shall have expired, CITY shall have the following rights and remedies all in addition to any rights and remedies that may be given to CITY by statute, common law or otherwise: a) CITY may distrain for rent due any of LESSEE's personal property which comes into CITY's possession. This remedy shall include the right of CITY to dispose of personal property distrained in any commercially reasonable manner. It shall be conclusively presumed that compliance with the procedures set forth in the Alaska 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 Leased Land 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 proc!3ss, all of which LESSEE expressly waives. . c) Declare this Lease terminated. SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 28 . . . DRAFT 07/26/93 BEM/pll Revision #0 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, reasonable attorney's fees from LESSEE 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 the rent reserved under this Lease 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-Iet by CITY for the unexpired term of this Lease, CITY shall reimburse to LESSEE upon receipt an amount not to exceed the amount received by CITY under this paragraph. g) If LESSEE does not immediately surrender possession of the 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 SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 29 . . . DRAFT 07/26/93 BEM/pll Revision #0 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 CI1Y 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 CI1Y 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 14. TITLE TO IMPROVEMENTS INSTALLED BY LESSEE. 14.1 Real Property Improvements. All improvements constructed by LESSEE 011 the Leased Land or on easements to or from the same, such as buildings, warehouses, conveyor systems, ditches, sewer lines, water lines, dikes or berms, and similar improvements, shall become the property of CI1Y upon termination of this Lease for any reason; provided, however, that CITY may require LESSEE to remove any improvements designated by CI1Y without cost to CI1Y. 14.2 Personal Property. Any other provisions of this Lease to the contrary notwithstooding, LESSEE, upon termination of this Lease for any reason, may, but need not, promptly remove, in no event later than ninety (90) days from the termination of the SEWARO FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 30 . DRAFT 07/26/93 BEM/pll Revision #0 lease,- trade fixtures and equipment from the Leased Land provided that LESSEE shall repair any damages to the Leased Land caused by such removal. ARTICLE 15. SUBLEASE OR ASSIGNMENT. 15.1 Assignment of Lease or Subleasing. LESSEE shall not assign this Lease nor sublet the Leased Land, or any part of the Leased Land, without the prior written consent of CllY to such assignment or subletting. Consent by OIlY is contingent upon final approval by the City Council by a resolution or ordinance as required for approval of an initial lease of City property. No such assignment or subletting shall relieve LESSEE from its liabilities under this Lease or its duty to perform all of the agreements, covenants, and conditions set forth in this Lease. Any change in the composition of the LESSEE Joint . Venture membership shall be treated as an assignment or sublease of this Lease and require consent by the City as provided herein. 15.2 Assi(;mment of Lease for Security. Notwithstanding Section 15.1 above, LESSEE may assign, encumber or mortgage its interest 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. CITY shall furnish Lender, at the address provided to CllY by Lender in writing, with notice of any defa~lt 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 . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 31 . DRAFT 07/26/93 BEM/pll Revision #0 this Lease) to make good such default or breach within thirty (30) days after written notice specifying such breach. Notwithstanding the provisions of Article 12 above, no "LESSEE Act of Default" shall exist until expiration of thirty (30) days after such notice is furnished to Lender; provided, a) 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 relet the Leased Land unless Lender fails to cure the default or breach within a reasonable period of time thereafter; and b) if the default for which notice is given is a breach of Article 12(c), CITY shall not exercise any of the remedies afforded to it under Article 13 above so long as LESSEE or . Lender remains in possession of the Leased Land and satisfies LESSEE's obligations under the terms of this Lease. 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. ARTICLE 16. LESSEE'S DUTY TO DEFEND/INDEMNIFY. LESSEE agrees to defend, indemnify and hold CITY harmless from any and all claims for damages, including personal injuries, death and property damage arising out of or resu~ting from LESSEE's or Prior Lessee's use of the Leased Land or the use of the Leased Land by LESSEE's or Prior Lessee's sub-lessees, agents or contractors or the . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 32 . DRAFT 07/26/93 BEM/pll Revision #0 public,~ except for damages arising from the sole negligence or willful acts or omissions of CITY, its agents, employees, or contractors. ARTICLE 17. CITY'S DUTY TO DEFEND/INDEMNIFY. CITY agrees to defend, indemnify and hold LESSEE harmless from any and all claims for damages, including personal injuries, death and property damage arising from the sole negligence or willful acts or omissions of CITY; its agents, employees, or contractors or from conditions existing or activities occurring on the Leased Land prior to the effective date of the Prior Lease. ARTICLE 18. INSURANCE. Prior to commencement of the lease term, 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 any' one person and Two Million Dollars ($2,000,000) limit from anyone occurrence. The limit of liability for property damage shall be Ten Million Dollars ($10,000,000) for each occurrence and aggregate. Coverage under such insurance shall also include explosion, collapse and underground property damage hazards, and any claim arising out of or related to any event or happening directly or indirectly caused by or resulting from the dispersal, discharge, escape, release, removal, or saturation of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids, gases, contaminants, or pollutants into the . atmosphere, or in, onto, upon, or into surface or subsurface of a) soil; b) water or . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOOl1C Page 33 . . . DRAFT 07/26/93 BEM/pll Revision #0 watercourses; c) objects; and, d) any tangible or intangible matter, whether sudden or not. Such insurance shall include a blanket contractual liability endorsement. For non- owned watercraft of LESSEE or its customers any "watercraft exclusion" in the commercial liability insurance policy shall be eliminated. Protection and indemnity insurance shall be provided with the same limits as the commercial liability insurance for the use of LESSEE- owned watercraft. 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 Lease 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 liying, 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 i~ insurance coverages. SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11 C Page 34 . DRAfT 07/26/93 BEM/pll Revision #0 -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 39 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 B + 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 February 15, 1993, 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 the broker has revieweq 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 ~rther agrees to waive and agrees to have its insurers waive any rights of subrogation (whether by loan receipts, equitable assignment or otherwise), with respect . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 35 . DRAFT 07/26/93 BEM/pll Revision #0 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. ARTICLE 19. 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 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 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, LESSEE may notify CI~ 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 . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 36 . DRAFT 07/26/93 BEM/pll Revision #0 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 CllY shall negotiate an equitable and partial abatement of the rent beginning to be effective on the actual date when LESSEE is effectively prevented from utilizing the condemned land. ARTICLE 20. ARBITRATION. Any dispute between CllY 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. 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 another person designated to serve as an arbitrator. If neither party has objected to the other's designation within fifteen (15) days of the notice; by the second party of its designation of an arbitrator, then the two chosen arbitrators (called the "consent panel") shall select a third person agreeable to both to . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOOl tC Page 37 . DRAFT 07/26/93 BEM/pll Revision #0 become the third mamber of the consent panel. The consent panel may utilize informal techniques and hold informal hearings without referenca or adherence to the rules or procedures of the American Arbitration Association. Promptly and within thirty (30) days of concluding any proceeding the consent panel shall render its written decision. It is the intent of this 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 party desiring arbitration 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 to the prevailing party. ARTICLE 21. MAINTENANCE AND REPAIRS. 21.1 Normal Maintenance. 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 . SEWARD FOREST PRODUCTS LEASE NO.3 AMMoo11 C Page 38 . DRAFT 07/26/93 BEM/pll Revision #0 LESSEE, in as good condition as received or constructed by LESSEE, ordinary wear and tear excepted. CITY, at C:TY's sole option and expense, may, prior to the commence- ment of construction by LESSEE, perform maintenance and preventative work on the Leased Land, exclusive 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 and risk unless LESSEE agrees, in advance and in writing, to share such expense and risk. 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 CITY may periodically inspect the Leased Land and facilities constructed thereor~ . in order to ascertain the condition of the public portion of the Leased Land but the exercise of this right shall not imply any obligation to do so nor any obligation to do so in any particular way. 21.2 Safety Issues. CITY may notify LESSEE in writing of any deficiencies in the performance of LESSEE's maintenance responsibilities as they relate to public health or safety and LESSEE shall promptly within thirty (30) days of receipt of such notice advise CITY in writing of its proposed schedule for performance of any work necessary to cure such deficiencies. SEWARD FOREST PRODUCTS LEASE NO.3 AMMOOllC Page 39 . DRAFT 07/26/93 BEM/pll Revision #0 If such deficiencies relate to the safety of LESSEE's operation such that the surrounding land and port facilities are exposed to risk, unnecessary potential hazards, or a risk to the public interest (as distinguished from a business risk), or if CITY is not satisfied with the proposed schedule of repairs either because of the delays therein or the scope of the repairs, then CITY may engage an independent engineering consultant well- versed and experienced 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. 21.3 Cost of Repairs. Should LESSEE dispute the necessity of any maintenance. . work as being necessary or advisable or reasonable to protect the public facilities on the Leased Land or on adjacent land, 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 should ultimately find thatthe repairs were not necessary then LESSEE may either deduct from future rental payments the cost of such repairs or be reimbursed therefor. In deciding whether repairs requested by CITY or requireg by an engineering report are necessary, the arbitration panel is to give primary SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 40 . DRAFT 07/26/93 BEM/pll Revision #0 consideration to the safety and welfare of the Seward port facilities and the citizens of Seward in light of the highest standards in the industry. If any facility or service provided by CITY to the Leased Land 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 therefrom, LESSEE shall either construct such improvements at LESSEE's own cost or reimburse CITY for such work at the option of CITY. ARTICLE 22. ENVIRONMENTAL CONCERNS. 22.1 Hazardous Materials. a) Condition of Site. LESSEE has had full opportunity to examine the site for the . presence of any Hazardous Material and accepts the site in "as is" condition. LESSEE is already in possession of the Leased Land as a successor to the Former Lessee. b) Release of CITY. Any other provision of this Lease to the contrary notwith- standing, LESSEE releases CITY from any and all claims, demands, penalties, fines, judgments, liabilities, settlements, damages, costs or expenses (including, without limitation, attorney's fees, court costs, litigation expenses, and consultant.and expert fees) arising during and after the term of the Prior Lease or this Lease, and resulting from the use, keeping, storage or disposal of Hazardous Material on the site by Former-Lessee or LESSEE, ?r arising out of or resulting from Former Lessee's or LESSEE's operations at the site except for those arising out of the CITY's sole negligence or intentional . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 41 . DRAFT 07/26/93 BEM/pll Revision #0 misconduct. This release includes, without limitation, any and all costs incurred due to any investigation of the site or any cleanup, removal or restoration mandated by a federal, state or local agency or political subdivision or by law or regulation. c) Use of Hazardous Materials on the Site. i) LESSEE shall not cause or permit any Hazardous Material to be brought upon, kept or used in or about the Leased Land except for such Hazardous Material as is necessary to conduct LESSEE's authorized use of the Leased Land. ii) Any Hazardous Material permitted on the Leased Land as provided in this paragraph, and all containers therefor, shall be used, kept, stored and disposed of in a manner that complies with all Environmental Laws or other laws or regulations applicable . to such Hazardous Material. iii) LESSEE shall not discharge, leak or emit, or permit to be discharged,. leaked or emitted, any material into the atmosphere, ground, ground water, sewer system or any body of water, if such material (as reasonably determined by the City, or any governmental authority) does or may, pollute or contaminate the same, or may adversely affect the: (a) health, welfare or safety of persons, whether located on the Leased Land or elsewhere; or (b) the condition, use or enjoyment of the Leased Land or any other area or personal property. . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 42 . DRAFT 07/26/93 BEM/pll Revision #0 iv) LESSEE hereby agrees that it shall be fully liable for all costs and expenses related to the use, storage and disposal of Hazardous Material kept or brought on the Leased Land by LESSEE, its authorized representatives and invitees, and LESSEE shall give immediate notice to CITY of any violation or potential violation of the provisions of this subparagraph. d) Indemnification of CITY. Any other provision of this Lease to the contrary notwithstanding, LESSEE shall defend, indemnify and hold CITY harmless from and against any claims, demands, penalties, fines, judgments, liabilities, settlements, damages, costs or expenses (including, without limitation, attorney, consultant and expert fees, court costs and litigation expenses) of whatever kind or nature, known or unknown, contingent . or otherwise, arising out of or in any way related to: i) the presence, disposal, release or threatened release of any such. Hazardous Material which is on, from or affecting the Leased Land, soil, water, ground . water, vegetation, buildings, personal property, persons, animals or otherwise; ii) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Material; iii) any lawsuit brought or threatened, settlement reached or government order relating to such Hazardous Material; and/or SEWARD FOREST PRODUCTS lEASE NO.3 AMMOO11 C Page 43 . DRAFT 07/26/93 BEMjpll Revision #0 iv) any violation of any laws applicable thereto; provided, however, ~hat this provision shall apply only if the acts giving rise to the claims, demands, penalties, fines, judgments, liabilities, settlements, damages, costs or expenses; (a) occur in whole or in part during or after the term of the Prior Lease or this Lease; and (b) arise in whole or in part from the use of, operations on, or activities on the Leased Land by Former Lessee and LESSEE or their employers, employees, agents, invitees, contractors, subcontractors or authorized representatives. The provisions of this subparagraph shall be in addition to any other obligations and liabilities LESSEE may have to CllY at law or equity and shall survive the transactions . contemplated herein and shall survive the termination of this Lease. e) Facility operator. For all purposes, LESSEE shall be deemed the operator of any facility at the Leased Land. f) Hazardous Material defined. As used in this Lease, Hazardous Material is any substance which is toxic, ignitable, reactive, or corrosive or which is regulated by any Environmental Law. Hazardous Material includes any and all material or substances which are defined as "hazardous waste", "extremely hazardous waste" or a "hazardous substance" under any Environmental Law. Notwithstanding any statutory petroleum exclusion,;for the purposes of this Lease, the term Hazardous Material includes, without . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 44 . DRAFT 07/26/93 BEM/pll Revision #0 limitation, petroleum, including crude oil or any fraction thereof, petroleum soaked absorbent material and other petroleum wastes. g) Environmental Law defined. As used in this Lease, Environmental Laws include any and all local, state and federal ordinances, statutes, and regulations, as now in force or as may be amended from time to time, relating to the protection of human health and the environment, as well as any judgments, orders, injunctions, awards, decrees, covenants, conditions, or other restrictions or standards relating to same. Environmental Laws include, by way of example and not as a limitation of the generality of the foregoing, the Rescurce Conservation and Recovery Act of 1976, the Comprehensive Environmental Response, Compensation and Uability Act of 1980, the Clean Water Act, and the . Superfund Amendments and Reauthorization Act of 1986. 22.2 Permits and Reporting. a) Permits required by other governmental agencies. LESSEE shall obtain all permits or approvals required by any applicable law or regulation. Copies of all such permits shall be provided to CITY prior to LESSEE commencing work under this Lease. LESSEE shall promptly make all reports to any federal, state or local government or agency required by any permit or Environmental Law, including reports of any spill or discharge of Hazardous Material. The City Manager may order LESSEE to immediately cease an~ operations or activities on the Leased Land if the same is being carried out . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 45 .. ,- , . DRAFT 07/26/93 BEM/pll Revision #0 without necessary permits, in violation of the terms of any permit or Environmental Law, or contrary to this Lease. b) Correspondence with and reports to environmental agencies. LESSEE shall immediately provide CITY with copies of all correspondence and notice, including copies, of all reports between LESSEE and any state, federal or local government or agency regulating Hazardous Material which relates to LESSEE's operations on or use of the Leased Land. ARTICLE 23. FIRE PROTECTION. LESSEE shall at its sole cost, risk and expense provide fire protection to its operations on the Leased Land and fire prevention to industry standards for risks to . adjacent port facilities such that those risks are minimized. LESSEE shall continue to provide and maintain industry accepted standards of fire protection such that the City o~ Seward's ISO rating is not degraded by reason of LESSEE'S operation. The parties agree that with the rapid expansion of technology in the field of fire prevention and control LESSEE's obligations hereunder may vary during the term of this Lease and CITY may submit LESSEE's compliance with its obligation hereunder to arbitration not more frequently than once each five years. ARTICLE 24. ESTOPPEL CERTIFICATES. Eit~er 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 . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOOtlC Page 46 . . . .' . DRAFT 07/26/93 BEM/pll Revision #0 party, or to its designee, a statement in writing certifying that this Lease is unamended and in full force and effect (or, if there has been any amendment thereof, that the same is in full force and effect as amended and stating the amendment or amendments), that there are no defaults existing (or, if there is any claimed default, stating the nature and extent thereof); and stating the dates to which the rent and other charges have been paid in advance. ARTICLE 25. 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. ARTICLE 26. 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, covenants or conditions. No waiver of any breach shall affect or alter this Lease, but each and every term, covenant and condition of this Lease shall continue in full force and effect with respect to any other then existing or subsequent breach. ARTICLE 27. TIME OF THE ESSENCE. Time is of the essence of this Lease and of each provision. ARTICLE 28. COMPUTATION OF TIME. SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 47 . . . DRAFT 07/26/93 BEMjpll Revision #0 The time in which any act provided by this Lease is to 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 29. 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 30. 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 31. GOVERNING LAW. This Lease shall be governed by, construed and enforced in accordance with the. laws of the State of Alaska. ARTICLE 32. 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 33. RELATIONSHIP OF PARTIES. Notbing 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 SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 48 .. . J 10' . DRAFT 07/26/93 BEM/pH Revision #0 joint venture or of any association between CITY and LESSEE; and 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 34. 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 counsel in drafting and reviewing this Lease. ARTICLE 35. 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 36. MANDATORY AND PERMISSIVE. "Shall," "will" and "agrees" are mandatory; "may" is permissive. ARTICLE 37. CAPTIONS. Captions of the articles, 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 provision~ of this Lease. ARTICLE 38. AMENDMENT. . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOOllC Page 49 ... .' ... . . . DRAFT 07/26/93 BEM/pll Revision #0 This Lease is not subject to amendment except in writing executed by both parties hereto. ARTICLE 39. DELIVERY OF NOTICES - METHOD AND TIME. All notioes, 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 40 and to such other persons and addresses as either party may designate. Notice shall be deemed to have been given at the time of mailing. ARTICLE 40. NOTICES. All notice, demands and requests from LESSEE to CITY shall be given to CITY at the following address: A TIN: 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: Project Manager Seward Forest Products c/o Young & Morgan North, Inc. P. O. Box 2229 Seward, Alaska 99664 ARTICLE 41. 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 39. SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 50 . .' -... . . . DRAFT 07/26/93 BEM/pll Revision #0 -IN WITNESS WHEREOF, the parties hereto have set their hands and seals the date first hereinbefore set forth. CllY: LESSEE: CllY OF SEWARD SEWARD FOREST PRODUCTS By Tyler Jones City Manager Jam: fi?:hi~ (& r ATTEST: APPROVED AS TO FORM: Unda Murphy City Clerk WOHLFORTH, ARGETSINGER, JOHNSON & BRECHT Attorneys for the City of Seward By Thomas F. Klinkner City Attorney STATE OF ALASKA ) THIRD JUDICIAL DISTRICT) ) ss. THIS IS TO CERTIFY that on this day of May, 1993, before me, the undersigned, a Notary Public in and for the State of Alaska, personally appeared lYLER JONES and LINDA MURPHY, known to me and to me known to be the City Manager and City Clerk, respectively, of the City of Seward, and known to be the individuals named in SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 51 . ...' ~ . DRAFT 07/26/93 BEM/pH Revision #0 and who executed the foregoing document, and they acknowledged to me ~h",t thl?~1 \Alprp 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 """""" "" U V IIV "'" ....' \'-;...........G.C\'" .:~ ,"c;,SION ~-t.~). ~ ~C).,~~ ~".O-:' :-J/~ ~OTAR}> ~\Z\ : :() _e_ (/): : S :.. PUBUC .: ~ s ..c.P. .o~ -:'''''''0h _.$3.'~" ~ "'1;-....':1... 2, \~~., (!> $' "" ~ ......... J.\~ ," "" OF WASP,'.... Vii ~ '..,t......,. STATE OF-AL .~I{'~ ) CWNf'/ Or lZ( ~ THl~D JUDICI,I',L DIf;:TRICB- written. Notary Public in and for Alaska My Commission Expires: ) ss. Sf :xl.no l Cft Lf THIS IS TO CERTIFY that on this I day of...... J' .1 ~~, before me, the ..0. undersigned, a Notary Public in and for the State of Alaska, personally appeared JnlVl'-S . r-...I?Q I'VIC ASArJ tiS Chief o.ovul;v8 orAe'er of SEWARD FOREST PRODUCTS, known to me and d to me known to be the individual named in and who executed the foregoing document, 17.pI7(.t'~wrv-e and they acknowledged to me that they were authorized to execute the foregoin~ " 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. Dt,OJe ~. Notary Public in an~~ ~ My Commission Expires: . '1 . SEWARD FOREST PRODUCTS LEASE NO.3 AMMOO11C Page 52 CITY OF SEWARD, ALASKA RESOLUTION NO. 94-106 WHEREAS, Lessee and City desire to make certain changes in the terms of the Prior Lease for the continued use and development of the Leased Land by the Lessee in continuance of the City's above-stated objective to promote economic development and employment in the community; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, that: Section 1. Lease Agreement No.3 with Seward Forest Products, a copy of which is attached and incorporated herein by reference, is hereby approved, and the City Manager is authorized and directed to sign the lease on behalf of the City of Seward. Section 2. This resolution shall take effect thirty (30) days after passage and posting as required by law. PASSED AND APPROVED by the City Council of the city of Seward, Alaska, this 25th day of July, 1994. THE CITY OF SEWARD, ALASKA ~~ L~ (OAf>> 'h.Q ) Dave W. Crane, Mayor - AYES: NOES: ABSENT: ABSTAIN: Anderson, Bencardino, Crane, Darlin~ Krasnansky, O'Brien, Sieminski None None None A TrEST: APPROVED AS TO FORM: Wohlforth, Argetsinger, Johnson & Brecht, Attorneys for the city of Seward, Alaska ()~ City Attorney (City Seal)