HomeMy WebLinkAboutRes1988-007
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Sponsored by: Schaefermeyer
CITY OF SEWARD, ALASKA
RESOLUTION NO. 88-007
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SEWARD, ALASKA, APPROVING A LEASE AGREEMENT
WITH CHUGACH ALASKA CORPORATION, INC.
WHEREAS, the city of Seward has sought proposals for
development of city-owned real property in the vicinity of
the Seward Marine Industrial Center; and
WHEREAS, the Chugach Alaska Corporation, Inc., a
corporation organized and existing under the laws of the
State of Alaska and 43 U.S.C.A. ~1601 (1971), has proposed
to lease lands from the city of Seward for the construction
and operation of a forest products manufacturing and elec-
tric co-generation facility; and
WHEREAS, the facilities would provide substantial
employment opportunities within for the city of Seward and
promote the growth and stability of the economy in that the
industry would be a beneficial new industry to the commun-
ity; and
WHEREAS, Chugach Alaska Corporation has agreed to pay
either the fair market value of the land to be leased or, at
its option, to construct substantial improvements thereon,
and such construction would further the public interest by
the development of the Seward Marine Industrial Center and
the development of a beneficial industry to the city of
Seward; and
WHEREAS, an appraisal of the property would not be in
the public interest and would be an unnecessary expense to
the city of Seward,
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF
THE CITY OF SEWARD, ALASKA, that:
Section 1. A lease agreement between the city of
Seward and Chugach Alaska Corporation in substantially the
form as that attached to this resolution as Exhibit A is
approved and the City Manager is authorized to execute the
same.
Section 2. It is in the public interest to not require
the disposal of the land subject to the lease agreement by
public bid or auction and a negotiated lease provides the
city of Seward with the best terms and conditions of lease
and further will provide incentives to the Lessee to develop
a beneficial new industry for the city of Seward.
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CITY OF SEWARD, ALASKA
RESOLUTION NO. 88-007
Section 3. An appraisal of the property is not in the
public interest.
Section 4.
(30) days after
ordinances of the
This resolution
posting hereof
city of Seward.
shall take effect thirty
in accordance with the
PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF
SEWARD, ALASKA, this 11th day of January , 19 88
THE CITY OF SEWARD, ALASKA
e~
GIESELER, MAYOR
AYES:
NOES:
ABSENT:
ABSTAIN:
DUNHAM, GIESELER, HILTON, MEEHAN, NOLL, O'BRIEN & SIMUTIS
NONE
NONE
NONE
ATTEST:
APPROVED AS TO FORM:
HUGHES, THORSNESS, GANTZ,
POWELL & BRUNDIN, Attorneys
for the City of Seward, AK
7~ flI~_
Fred B. Arvidson
City Attorney
(City Seal)
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LEASE AGREEMENT
This Agreement made and entered into effective as of the _ day of
, 1988, by and between the City of Seward, a municipal corporation
located in the Kenai Peninsula Borough, State of Alaska, hereinafter referred to as
"CITY" and Chugach Alaska Corporation, Inc., a corporation organized and existing
under the laws of the State of Alaska and 43 U.S.C.A. {1601(1971), hereinafter referred
to as "LESSEE".
WHEREAS, CITY has agreed to lease to LESSEE and LESSEE has agreed to
lease from CITY twenty (20) acres, more or less, of properties within the boundary limits
of the City of Seward, Alaska, hereinafter referred to as the "leased land"; and
WHEREAS, CITY has 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 leased
land and construction thereon of a forest products manufacturing and/or electric co-gen-
eration facility would be in the public interest in that such a facility would provide
employment for the residents of the City of Seward, and promote the growth and stability
of the economy of Seward all as set forth more fully in Resolution 88- adopted by the
City Council of the City of Seward, Alaska; and
WHEREAS, CITY is committed to utilizing its best efforts to provide tax exempt
financing construction of public port facilities on the leased land and LESSEE agrees to
operate those facilities in accordance with any public regulatory or financing require-
ments; and
WHEREAS, it is the intent of this LEASE to alleviate from CITY the entire
burden of compliance with present or future environmental regulations or controls with
respect to the leased land; and
WHEREAS the parties agree that the leased land is one of few parcels within the
Seward Marine Industrial Center suitable for forest products manufacturing and/or elec-
tric co-generation activities and that the City of Seward has made a substantial investment
in public facilities adjacent or in proximity to the leased land with the objective of
providing employment and economic activities for the community; and
WHEREAS, LESSEE has agreed to make substantial private investment in facili-
ties on the leased land and to opportunities within the City of Seward, Alaska.
NOW THEREFORE, for and in consideration of the mutual promises and
covenants hereinafter contained, the parties hereto agree as follows:
ARTICLE t.--LEASED LAND.
(LEGAL DESCRIPTION TO BE ADDED--CONSISTS OF DRAWING
PREPARED BY LESSEE--ACTUAL METES AND BOUNDS TO BE INCLUDED
WITH EXHmIT B BELOW TO BE PREPARED BY SURVEYOR. DRAWING TO
INCLUDE THE PRESENTLY CONTEMPlATED RAILROAD EASEMENT.)
l.l--Survey of Leased Land. Within ninety (902 days from the date of this lease
agreement, the Lessee, at its sole cost and direction, WIll have a survey of the leased land
prepared by a registered land surveyor and the description of the land thus prepared shall
be attached to this lease agreement as Exhibit B and shall be incorporated herein by ref-
erence. That new description shall be considered the correct description of the leased
land for all purposes under this lease agreement. The intent of the parties in providing
for an intenm description of the leased land on Exhibit A is to sufficiently identify the
leased land for purposes of public hearing and approval of the lease agreement by the
City Council of the City of Seward, and further, to enable LESSEE to have immediate
access to the leased land for commencement of construction and site preparation.
1.2--Plattinl:. CITY and LESSEE shall jointly prepare and file for submission and
approval a re-plat of the leased land.
1.3--Covenant of Ouiet Enjoyment. Subject only to restrictions of title or provi-
sions 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 encumbrances and is fully
empowered to enter into this lease. CITY is unaware of any prior conflicting use of the
property which would adversely affect LESSEE's intended use of the property.
ARTICLE 2.--UTILITIES AND RIGHTS OF ACCESS.
LESSEE, at LESSEE's sole cost and expense, shall I?rovide for the extension of
public utilities to the leased land sufficient for LESSEE's mtended 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 assist the LESSEE in
LESSEE's planning and engineering of those improvements and further to assist in coor-
dinating the actual connection of those utilities to the City system.
2.1--Petitions for Zonini. CITY represents that the current zoning classification of
the leased land is . 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 appro-
priate 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 pre-
cise plan approval. This paragraph shall impose no duty or responsibility on the Citr to
assist LESSEE in obtaining any other permits or approvals for operation or constructIOn,
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. CITY shall cooperate
with LESSEE in LESSEE's efforts to promptly obtain any required permits for construc-
tion or operation of LESSEE's facilities.
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CITY will apply for any necessary tidelands lease from the appropriate govern-
mental agencies haVIng title to those lands. LESSEE will cooperate in that application
process and both parties will assist the other in expediting the application and grant pro-
cess. If CITY obtains a lease to the tidelands adjacent to the leased land then it will
provide LESSEE-for no additional consideration other than that contained in this lease--
rights of access across said tidelands adequate for LESSEE's intended operations of a
forest products manufacturing and/or electric co-generation facility. LESSEE agrees to
pay whatever charges might be incurred by CITY either in the form of lease payments to
the governmental agency having title to the tidelands, or any other permits or agency fees
as they become due. Any such charges shall not be subject to credits against rent under
ARTICLE 6. LESSEE may contest the amount of applicability of any of those charges
but LESSEE will not allow any lapse or default under any applicable leases or permits.
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 and in accordance with the terms of this Agree-
ment 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 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 b?l<?~d the lease
term shall not be granted without the prior written approval of C . In any of
the foregoing instances referred to in this paragraph, CITY shall be without
expense therefore, and the cost and expense thereof shall be borne solely by
LESSEE.
c) At the expiration of the lease term (including any extended period) third
party improvements on the leased land other than portable eqUIpment shall
become the property of CITY without the payment of any compensation to
LESSEE.
2.2--Future Easements. In order to provide for the more orderly commercial
development of the leased land and adjacent lands including publicly owned facilities at
the Seward Marine Industrial Center, it may be necessary, desirable or required that
street, railroad, water, sewer, drainage, gas, power line and other easements and dedica-
tions and similar rights be granted or dedicated over or within portions of the leased land.
As additional consideration for this lease, both CITY and LESSEE shall, at the request of
the other, join with each other in executing and delivering such documents from time to
time and throughout the lease term as may be appropriate, necessary, or required by the
several governmental agencies (including the CIty of Seward), publIc utilities and other
users or tenants of the Seward Marine Industrial Center for the purpose of granting such
easements and dedications; provided, however, that such easements and dedications and
similar rights do not unreasonably interfere with LESSEE's efficient operation. The costs
of locating or relocating any public easements or restrictions of record including any relo-
cation of rublic road, railroad, utility, or other easement shall be at the sole cost and
expense 0 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
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development of the Seward Marine Industrial Center. Any easements or rights of access
granted to LESSEE by CITY need not be exclusive to LESSEE.
2.3-lnterim Riiht to Possession. The parties understand, and LESSEE is specifi-
cally takins the risk that under the Charter and Ordinance provisions for the City of
Seward, thIS lease agreement may be voided by a referendum vote of the people, and that
the grant to LESSEE of the right to possession of the leased premises prior to the passa~e
of thirty (30) days from the date of approval of this lease by the City Council for the CIty
of Seward shall in no way affect or reduce the rights of the voters to reject this lease
agreement, in which case LESSEE shall not be entitled to any damages, or any other
recovery against CITY. Permitting LESSEE to occupy the land 10 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 J.--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, sub-
ject 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 mate-
rialmen's liens.
c) LESSEE shall supply CITY with a copy of all building plans and specifi-
cations 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 e~uipment, or the personnel and equipment of
any corporation or person that is an 'affiliate" of LESSEE as such term is defined
in A.S. 10.05.825(18), a performance bond shall be required when the cost of the
work is over Fifty Thousand Dollars ($50,000).
e) CITY may, as contemplated by Alaska Statutes, give notice of non-re-
sponsibility for any improvements constructed or effected by LESSEE on the
leased land.
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.
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g) LESSEE may add/alter, or remodel improvements at LESSEE's discre-
tion during the term of this lease provided that during any period in which
LESSEE claims a rental offset under ARTICLE 6 LESSEE shall not permit the
value of the improvements to be reduced below that determined in accordance
with Section 6.1.
ARTICLE 4.--LEASE TERM.
4.1--lnitial Term. The initial term of this lease shall be for a period of twenty
years, commencing on , 1988 and ending on , 2008.
4.2--0ptions to Renew. LESSEE shall have the right to extend the initial term of
this lease for four additional five year periods, called the first, second, third and fourth
option terms successively, provided:
a) That LESSEE exercises any applicable option to renew at least one hun-
dred 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 of this lease agreement.
c) LESSEE shall exercise its options to renew by sending written notice
thereof In accordance with the provisions of this lease.
ARTICLE S.--RENT.
5.1--lnitial Rental Rate. During the first five (5) years of this lease, some of which
period will be the initial construction term, the annual rental rate shall be per square foot.
The rent shall be payable semi-annually in advance in equal installments on or before the
first day of and the first day of . The anniversary date of
this lease shal be thirty 30) days following the approval of this lease agreement by the
City Council of the City 0 Seward.
5.2--Rental Adiustments. Not more than ninety (90) days before the fifth anniver-
sary date of the lease, and once each five years thereafter, the total annual rental due and
payable shall be adjusted to the fair market value at the highest and best use of the leased
land, exclusive of if:~ovements placed thereon by LESSEE but inclusive of all improve-
ments made by C (including those made before or subsequent to this lease agree-
ment). As an aid to future appraisals the parties have attached a photographic record
collectively referenced to as Exhibit C demonstrating the condition of the leased land
prior to this lease agreement. The annual rent shall be 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 land unless that use is coincidentally the highest and best use of the land.
5.3--Procedure for Rental Adiustment. If LESSEE objects to the appraiser's de-
termination 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 in-
dependent 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.
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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 value of the rent shall be determined in accordance with the arbi-
tration provisions contained in ARTICLE _ of this lease.
ARTICLE '.--CREDITS AGAINST RENTS.
As an incentive to provide for investment at the Seward Marine Industrial Center
and employment for Seward residents, LESSEE shall be entitled to credit against rent if
the conditions in both of the following paragraphs are met:
6.1--Credit A~ainst Rent for Construction Investment. Until December 31, 1990,
LESSEE shall be entitled to accrue credits against future annual rental obligations up to a
number equal to the number of years under the primary term of this lease (but not any
renewals or extensions hereof) for the value of improvements constructed by LESsEE on
the leased land. For each One Million Dollars ($1,000,000) of value of improvements to
the leased land (but not for any fractional portion thereof) LESSEE shall be entitled to a
credit against rent equivalent to one year's rental payment. Under no circumstances may
LESSEE accrue rental credits by reason of construction of leasehold improvements after
December 31, 1990.
Prior to December 31, 1990, LESSEE, at its own expense, shall employ an inde-
pendent MAl certified appraiser to determine the total fair market value of the
improvements to the leased land constructed by LESSEE. If CITY does not object to
that appraisal, the stated value of the improvements shall be used for determining the ex-
tent of the credit against rent LESSEE will be entitled to claim.
If CITY objects to the appraised value within thirty (30) days of receipt of the
report, it shall give LESSEE written notice of its objection and CITY shall then engage a
second independent MAl certified appraiser at its expense to make a second appraisal of
the fair market value of the improvements actually constructed on the leased land by
LESSEE.
If the second appraisal reflects a fair market value of improvements constructed by
LESSEE 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
value rental which varies from the first appraisal by more than ten percent (10%), then,
unless CITY and LESSEE agree on a value among themselves, the value of improve-
ments shall be determined in accordance with the arbitration provisions contained in
ARTICLE of this lease.
During the time period that the parties are in the process of arbitrating the fair
market value of LESSEE's improvements, LESSEE shall not be required to pay rent pro-
vided the lower of the two appraisals would still provide for a credit against rent and, pro-
vided further, that LESSEE complies with Section 6.2 of this agreement.
After the fair market value of the improvements constructed by LESSEE has been
determined, the number of years of rental credit to which LESSEE shall be entitled shall
be computed by dividing that value by the sum of One Million Dollars ($1,000,000). The
resulting figure, up to a maximum of twenty (20), shall represent the number of years to
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which LESSEE shall be entitled to a rental credit. LESSEE shall not be entitled to any
fractional portion beyond a full year. For example, and by way of illustration, if it is
determined that by December 31, 1990, LESSEE has constructed improvements to the
leased land with a fair market value of $12,300,000 then LESSEE shall be entitled to a
rental credit equivalent to twelve (12) years of lease payment obligations under this lease.
LESSEE shall be entitled to a credit against rent for the first year of the lease term
if it certifies that it will commence substantial construction within the first year and if it in
fact performs that construction. It at the end of the first lease year LESSEE has not
commenced construction and diligently and continuously continued construction, then
LESSEE shall pay the annual rental rate set forth in ARTICLE 5 within twenty (20) days
of the end of the first lease year.
LESSEE shall be entitled to a credit against rent for the second year if it continues
construction and if in addition to the above requirements, it certifies to CITY prior to the
commencement of the second lease year that it will: 1) construct improvements on the
leased land of a value of at least Two Million Dollars ($2,000,000), and 2) that it will pro-
vide at lease 30,000 man-hours of employment in the City of Seward during the second
lease year. CITY may verify compliance with LESSEE's performance of these two condi-
tions upon reasonable doubt that LESSEE has performed and, if LESSEE has failed to
do so, it shall pay the annual rent set forth in ARTICLE 5 within sixty (60) days of the end
of the second lease year.
LESSEE shall be entitled to a credit against rent for the third and subsequent
years if it complies with Section 6.2 below; and
6.2--Permanent Employee Oblili:ation. As set forth in Resolution 88- one of
the primary reasons for the approval of this lease agreement is the commitment of
LESSEE to provide employment in Seward in the development of a beneficial new indus-
try--namely a forest products manufacturing and/or electric co-generation facility. In or-
der to use a credit against rent to which LESSEE is entitled under Section 6.1 above,
LESSEE must have operated during the preceding year a forest rroducts manufacturing
and/or electric co-generation facility from the leased land and, i a rental credit is to be
claimed for construction of them, LESSEE must have operated the improvements con-
structed thereon by LESSEE and to have provided employment within the city limits of
the City of Seward during the preceding one year at a level equal to 30,000 man-hours.
CITY shall have the right to verify LESSEE's compliance with the provisions of this Arti-
cle by being provided quarterly certified payroll records showing the hours worked in
Seward.
LESSEE's failure to comply with this employment obligation in any year shall
result in the irrevocable loss of a full year credit against rent for that year which rent shall
be paid within sixty (60) days after the end of the lease year.
6.3--Illustration. As a further illustration of the mechanism contemplated by this
Article, the following example is given:
a) lease term commences February 10, 1988.
b) by September 30, 1988, LESSEE commences construction of harbor
improvements and continues construction through the end of the first year of the
lease.
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c) LESSEE certifies by February 11, 1989, that it will continue construction
and that it will provide over 30,000 man-hours of work in Seward prior to February
11,1990.
d) LESSEE continues construction throughout 1989 and has constructed
$12,100,000 of improvements by December 31, 1990. In addition, prior to
February 10, 1990, LESSEE has provided more than 30,000 man-hours of
employment in Seward.
Under this set of facts, LESSEE would be entitled to claim a full credit
against the first year of the lease term by reason of LESSEE's certification and
commencement of construction. LESSEE would be entitled to a full credit in the
second year by reason of LESSEE's certification and continuation of construction
and LESSEE's employment obligations having been met. Annually thereafter, and
provided LESSEE continues to meet the employment requirements and to
operate a forest products manufacturing and/or electric co-generation facility
utilizing the improvements for which LESSEE has claimed credits, LESSEE would
be entitled to use ten (10) separate additional annual rental credits based on the
total value of the improvements constructed by LESSEE prior to December 31,
1990.
ARTICLE '.--USE OF LEASED LAND.
LESSEE will only use the leased land for forest products manufacturing and/or
electric co-generation facilities.
7.l--No Preferential Ri~hts to Use Public Facilities. This lease agreement 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 other than those on the leased land.
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.
?Z--Other Users of Seward Marine Industrial Center. This lease agreement shall
not preclude the City of Seward from actively seeking other and additional tenants for
space at the Seward Marine Industrial Center including those who would be in
competition with LESSEE or who might be interested in leasing the premises leased to
LESSEE should this lease be terminated for any reason.
?3--Adequa~ of Public Facilities. CITY makes no reeresentations or warranties
as to any particular part or the whole of CITY's public faCilities with respect to their
fitness for the uses intended by LESSEE, and LESSEE has inspected those facilities and
has examined the plans and specifications of those facilities under construction or
planned for construction and has satisfied itself that the facilities are sufficient for the
intended uses by LESSEE. CITY has provided to LESSEE copies of a concept plan and
other information prepared for the City of Seward by Peratrovitch, Nottingham and
Drage, Inc., and others.
CITY makes no representations or warranties of any nature with respect to the
commercial practicability of that plan or accuracy of any other information. LESSEE has
independently reviewed that plan and information and is not relying on .any
representations made therein or by CITY, but has conducted its own reVIew,
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investigation, and assessment and where believed appropriate by LESSEE has modified
that plan. ~e J-Sries recognize that CITY has provided the plan and information to
LESSEE for EE's convenience and neither party intends the CITY or its agents
(including Peratrovitch, 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
amendments to its tariffs, regulations and scheduled fees from time to time even if those
a~)~ments shall cost LESSEE more for its operations or use of public facilities and
C is free to do so provided only that it does not pose any weater burden or higher
rate upon LESSEE than upon any other similar user of the pubhc facilities.
ARTICLE S.-RIGHT OF FIRST REFUSAL ON ADJACENT LAND.
In recognition of LESSEE's interest in expansion of its operations beyond the
leased land, and as further inducement to LESSEE to enter into this lease agreement,
CITY hereby grants to LESSEE the right to meet or exceed any offer by a third party to
lease the City land within that outlined in red on Exhibit A and not included in this lease
in accordance with the following provisions:
a) Option period. This right to lease may only be exercised by LESSEE
during the first five (5) years of this Agreement, that is to say, on or before
,1993.
b) Lease in good standing. The right may only be exercised by LESSEE if
LESSEt is not in default under any terms of this lease agreement, has performed
in a timely manner all obligations to be performed by LESSEE, and has not
transferred or assigned any of LESSEE's interest in this lease agreement to any
party without CITY's prior written permission having been obtained by LESSEE.
This right to lease additional land is intended to provide LESSEE with expansion
opportunities and not to allow LESSEE to speculate or otherwise benefit from any
increase in the value of the land subject to this option.
c) Exercise option. If CITY receives a bona fide offer to lease or purchase
the land subject to this Article and if the City Council finds that such a lease or
purchase would be in the public interest, then LESSEE shall have a period of
thirty (30) days from the date of the passage of the Resolution of the City Council
of the City of Seward making such a determination to exercise its right to either
lease or purchase the land on the same terms and conditions as those contained in
the offer to lease or the purchase agreement approved by the City Council.
LESSEE's failure to exercise this right within the time period designated shall
operate to terminate all of LESSEE's rights hereunder to lease the land (or
purchase it if the third party offer was an offer to purchase).
d) Intent. The intent of this provision is to provide for additional
expansion room for LESSEE without restricting CITY from seeking development
of that land from other parties. The parties recognize that, except for the
obligations contained in this lease agreement, LESSEE shall, during the option
period, not be required to pay any additional consideration for the right contained
10 this Article.
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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, war, blockade, insurrection, epidemic, fires, floods, explosions,
earthquakes/tsunami or war, the time period wherein such performance is to occur shall
be extended by that amount of time necessary to compensate for the delay.
ARTICLE lO.--CI1Y BREACH OF ITS OBLIGATION.
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) 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 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 specifyin~ such violation has been given by the agency to CITY;
provided, however, if said 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 ll.--REMEDIES FOR CI'IY'S ACTS OF DEFAULT.
Whenever an act of default by CITY shall have occurred, and any applicable
period for giving notice and any opportunity to cure shall have expired, LESSEE shall
have the following rights and remedies in addition to any rights and remedies that may be
given to LESSEE by statute, common law or otherwise:
a) Withhold payment of any rental otherwise due CITY.
b) Refuse to proceed with any of LESSEE's other performance obligations
under this lease.
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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 ri~t 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 other rights or remedies provided for in this
lease, now or thereafter existing at law or in equity or by statute or otherwise.
g) No delay or omission to exercise any right or power accruing following
an act of default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient.
ARTICLE 12...LESSEE'S ACTS OF DEFAULT.
Each of the followin~ shall be a "LESSEE Act of Default" under this lease and the
terms "acts of default" and' default" shall mean, whenever they are used in this lease, any
one or more of the following events:
a) Failure by LESSEE to pay promptly when due, and in no event later
than twenty (20) days from the due date thereof, the rentals required to be paid
under this lease or failure to promptly pay all sums due City including public fees
or user charges for adjacent public facilities, electrical, sewer or other service
charges.
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 benefit of creditors,
the filing of a petition in bankruptcy by LESSEE, the adjudication of LESSEE as
insolvent or bankrupt, the petition or application by LESSEE to any tribunal for
any receiver or any trustee for itself or for any substantial part of its property; or
the commencement of any proceeding relating to LESSEE under any bankruptcy,
insolvency, reorganization, arrangement or readjustment of debt law or statute or
similar law or statute of any jurisdiction, whether now or hereafter in effect which
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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 re~lations of such agencies, for a period of
sixty (60) days after written notice specifying such violation has been given by the
~cy charged with the enforcement of such laws, regulations or permits to
SEE; provided, however, if said violation be such that it cannot be corrected
within the a{>plicable 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 shal not commence until such proceedin~ 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
administrative or judicial action is to cause a stoppage, interruption or threat to
the activities of any person or entity other than those of LESSEE.
ARTICLE 13.--REMEDIES FOR DEFAULT BY LESSEE.
Whenever an act of default by LESSEE shall have occurred, and :rVapplicable
period for giving notice and any opportunity to cure shall have expired, C 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 premises and take possession thereof and,
except for any personal property of LESSEE which CITY has waived its right to
distrain under sub-part (a) above, remove all personal property of LESSEE from
the leased land. Such personal property may be stored in place or may be
removed and stored in a public warehouse or elsewhere at the cost of LESSEE all
without service of notice or resort to legal process, all of which LESSEE expressly
waives.
c) Declare this lease terminated.
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.
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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 poor to the termination
or expiration except insofar as otherwise agreed to in this lease.
i) Each right and remedy of CITY provided for in this lease shall be
cumulative and shall be in addition to every other right or remedy provided for in
this lease or now or hereafter existing at law or in equity or by statute or otherwise,
and the exercise or beginning of the exercise by CtrY of anyone or more of the
rights and remedies provided for in this lease or now or hereafter existing at law or
in equity or by statute or otherwise shall not preclude the simultaneous or later
exercise by CITY of any or all other rights or remedies provided for in this lease or
now or thereafter existing at law, or in equity or by statute or otherwise.
j) No delay or omission to exercise any right or power accruing following an
act of default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient.
ARTICLE 14.--TITLE TO IMPROVEMENTS INSTALLED BY LESSEE.
14.1--Real Property Improvements. All improvements constructed by LESSEE on
the leased land or on easements to or from same, such as buildings, warehouses, conveyor
systems ditches, sewer lines, water lines, dikes or berms, and similar improvements, shall
become the property of CITY upon the termination of this lease but with the following
conditions:
a) If during the term of this lease in which the LESSEE has accumulated
but has unused rental credits in accordance with ARTICLE 6 of this lease the
lease is terminated by reason of a default by CITY, and subject to any applicable
arbitration decision affirming that default LESSEE may remove any
improvements installed or constructed by LESSEE; provided, however, that
LESSEE shall repair any damage to the leased land caused by such removal.
b) If during that portion of this lease term in which the LESSEE has
accumulated but has not used all rental credits in accordance with ARTICLE 6 of
this lease the lease is terminated by reason of a default by LESSEE, and subject to
any applicable arbitration decision affirming that default, all improvements shall
become the property of CITY.
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c) If this lease is terminated by either party or for any reason after the time
in which LESSEE has accumulated and used rental credits in accordance with
ARTICLE 6 of this lease, LESSEE may remove any improvements from the
leased land provided that LESSEE shall repair any damages to the leased land
caused by such removal.
14.2--Personal Property. Any other provisions of this lease to the contrary
notwithstanding, LESSEE, upon termination of this lease for any reason, may but need
not promptly remove, and in no event later than ninety (90) days from the termination of
the lease, trade fixtures and equipment from the leased land r.rovided that LESSEE shall
repair any damages to the leased land caused by such remova .
ARTICLE IS.-SUBLEASE OR ASSIGNMENT.
The parties recognize that a material reason for the finding by the City Council of
Seward in Resolution 88- _ that it is in the public interest to lease the leased land to
LESSEE is LESSEE's status as a Native Regional Corporation under 43 U.s.C.A {16O1
and the interests of its Alaska Native shareholders, a substantial number of whom are
residents of the City of Seward. CITY does not consent to LESSEE's pledging or
assigning this lease or any improvement to the leased land as security in connection with
the financing of the construction of any improvements to the leased land and LESSEE
shall have no right to sublease or assign any portion or all of the leased land without
written permission of CITY. CITY shall have the right to refuse permission to any other
prospective assignee, sub-lessee or sub-tenant even though such entity intends to use the
leased land as a forest products manufacturing and/or electric co-generation facility, and
even though that corporation may be an Alaska Native corporation it being understood
that one of CITY's reasons for entering into this lease is the compatibility of LESSEE's
corporate objective with CITY's desire to promote the public interest. In the event that
this lease is assigned or any portion of this lease is transferred with the consent of CITY,
CITY shall not be required to permit the assignee or sublessee to utilize the accumulated
but unused credits against rent of LESSEE under ARTICLE 6 of this lease.
LESSEE may assign this lease to an affiliate of LESSEE as that term is defined by
AS. 10.05.825(1); provided, however, that LESSEE's full faith and credit shall remain
obligated under this lease agreement as though the transfer had not taken place.
ARTICLE I6.--LESSEE'S DUlY TO DEFENDIINDEMNIFY.
LESSEE agrees to defend, indemnify and hold CITY harmless from any and all
claims for damages, including personal injuries and property damage arising out of or
resulting from LESSEE's use of the leased land or the use of the leased land by
LESSEE's sub-lessees, agents or contractors or the public, except for damages arising
from the sole negligence or willful acts or omissions of CITY, its agent, employees, or
contractors.
ARTICLE I7.--CI1Y'S DUlY TO DEFENDIINDEMNIFY.
CITY agrees to defend, indemnify and hold LESSEE harmless from any and all
claims for damages, including personal injuries and property damage arising out of or
resulting from CITY's use of the leased land or the use of the leased land by CITY's
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agents or contractors or from conditions existing or activities occurring on the leased land
prior to the lease.
ARTICLE 18.--INSURANCE.
Prior to commencement of construction of any facilities on the leased land,
LESSEE shall procure and maintain, at LESSEE's sole cost and expense, comprehensive
general liability insurance, with limits of liability of for all
injuries and/or deaths resulting to anyone person and from
anyone occurrence. The limit of liability for property damage shall be
for each occurrence and aggregate. Coverage under such insurance shall also include
explosion, collapse and underground property damage hazards. Such insurance shall
include a broadform contractual endorsement. For non-owned watercraft of LESSEE or
its customers any ''watercraft 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 insurance for any buildings,
equipment, machinery, vessels of customers or any other property stored or being worked
on by LESSEE upon the leased land at replacement value rather than original cost.
LESSEE shall provide Workmen's Compensation Insurance and insurance under the
Harbor Workers and Longshoremen's Compensation Act, and warehouse and motor
vehicle insurance and any other insurance required under any permit or tariff of the City
of Seward, Alaska. The minimum amounts and types of insurance provided by LESSEE
shall be subject to revision in accordance with standard insurance practices, in order to
provide continuously throughout the term of this agreement and any extensions hereof, a
level of protection consonant with good business practice and accepted standards in the
industry. Such factors as increases in the cost of living, inflationary pressures, and other
considerations, shall be utilized in assessing whether the minimum insurance
requirements should be increased. CITY may notify LESSEE of any requested increase
in insurance coverages.
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 of
this lease. All such policies shall be written by insurance companies le~ally authorized or
licensed to do business in the State of Alaska, and acceptable to CITY (Best's Rating A or
better). LESSEE shall furnish CITY, on forms supplied by CITY, certificates evidencing
that it has procured the insurance required herein prior to the occupancy of the leased
land or operation by LESSEE. Nothing herein contained shall prevent LESSEE or CITY
from placing and maintaining at CITY's or LESSEE's own individual cost and expense,
additional or other insurance as may be desired.
At least annually, commencing on the first anniversary date of this lease and
annually thereafter throughout the term of this lease, LESSEE shall procure and submit
to CITY a written report from a reputable insurance broker acceptable to CITY that the
broker has reviewed the types and amounts of coverage of insurance obtained by
LESSEE and the operations of LESSEE and in the opinion of the broker the coverage
complies with LESSEE's obligations under this lease.
All of the insurance policies required above as well as any other insurance carried
by LESSEE or CITY shall provide that the insurers waive their rights of subrogation
against CITY and LESSEE and their respective officers, servants, agents or em~loyees.
LESSEE further agrees to waive and agrees to have its insurers waive any nghts of
Page 15
subrogation (whether by loan receipts, equitable assignment or otherwise), with respect to
deductibles under such policies and with respect to damage to equipment includmg 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 ~ood faith determination as to whether or not the taking of the part of the leased
land deSIgnated for condemnation will prevent if from continuing to operate on the leased
land. If LESSEE determines in good faith that the condemning of such part of the leased
land will prevent it from continuing to operate on the leased land, LESSEE may notify
CITY in writing to this effect, and this lease shall then be terminated for all purposes
effective fifteen (15) days from the date LESSEE sends such notice to CITY as though
the lease had been terminated under Section 14.1(c) of this lease agreement, or at such
other later date as LESSEE shall specify in its notice, and such termination shall be
treated in the same manner as a termination at the expiration of the term of this lease.
LESSEE shall, as a condition precedent to such termination, remove all encumbrances,
debts and liens to which the leased land is subject. If at the time of such partial taking for
public use, LESSEE determines that such partial takins will not prevent it from
continuing to operate, then LESSEE and CITY shall negotIate an equitable and partial
abatement of the rent beginning to be effective on the actual date when LESSEE is
effectively prevented from utilizing the condemned land.
ARTICLE 20.--ARBITRA TION.
Any dispute between CITY and LESSEE with respect to any provision of this
lease or the rights and obligations of the parties hereunder shall be decided by arbitration,
in accordance with the provisions of this paragraph.
a) Consent Panel. The party desiring arbitration of a dispute shall give
written notice to that effect to the other party specifying in such notice the name
and address of a person to serve as an arbitrator on its behalf. Within fifteen (15)
days after receipt of such notice the other party shall give written notice to the first
party specifying the name and address of a person designated to serve as an
arbitrator on its behalf.
If neither party has objected to the others designation within fifteen (15)
days of the notice by the second party of its representative of an arbitrator, then
the two chosen arbitrators (called the "consent panel") shall select a third person
agreeable to both to become the third member of the consent panel. The consent
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panel may utilize informal techniques and hold informal hearing without reference
or adherence to the rules or Erocedures 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 others choice of an arbitrator
pursuant to paragraph (a) above, or the first party initially decides not to use the
consent panel procedure, then the matter shall be promptly referred to the
American Arbitration Association in accordance with the then existing rules of the
American Arbitration Association.
c) Arbitration Awards. Any award by either a consent panel or as a result
or proceedings before a panel pursuant to the rules of the American Arbitration
Association shall be enforceable in accordance with Alaska Statutes. Any award
shall include an award of costs, interest and attorney fees.
ARTICLE 21.--MAINTENANCE AND REPAIRS.
21.1--Normal Maintenance. After the commencement of construction and during
the entire remaining term of this lease and every renewal or extension hereof, LESSEE
shall, at LESSEE's sole cost, risk and expense, maintain the leased land, including any
improvements placed thereon by LESSEE, in as good condition as received or
constructed by LESSEE, ordinary wear and tear excepted. CITY, at CITY's sole option
and expense, may, prior to the commencement of construction by LESSEE, perform
maintenance and preventative work on the leased land, exclusive 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 thereon in
order to ascertain the condition of the public portion of the premises but the exercise of
this right shall not imply any obligation to do so nor any obligation to do so in any
particular way.
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.
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
Page 17
scope of the repairs, then CITY may engage an independent engineering consultant well-
versed and experienced in forest products manufacturing and/or electric co-generation
facilities 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 m 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 facilities, it may submit the matter to arbitration;
provided, however, that pending the decision of the arbitrators it shall fully comply with
the maintenance requests. If an arbitration award (which shall include costs, interest and
attorneys' fees) should ultimately find that the repairs were not necessary then LESSEE
may either deduct from future rental payments the cost of such repairs or be reimbursed
therefor. In deciding whether repairs requested by CITY or required by an engineering
report are necessary the arbitration panel is to give primary consideration to the safety
and welfare of the Seward port facilities and the citizens of Seward to 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...FIRE PROTECflON.
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 of
Seward's ISO rating is not degraded by reason of LESSEE's operation. The parties agree
that with the rapid expansion of technology in the field of fire prevention and control
LESSEE's obligations hereunder may vary during the term of thIS lease and CITY may
submit LESSEE's compliance with its obligation hereunder to arbitration not more
frequently than once each five years.
ARTICLE 23.--ESTOPPEL CERTIFICATES.
Either 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 .a~d
m full force and effect (or, if there has been any amendment thereof, that the same IS m
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 e~e~t
thereof); and stating the dates to WhICh the rent and other charges have been paId III
advance.
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ARTICLE 24.-CONDmONS 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 25.--NO WAIVER OF BREACH.
No failure by either CITY or LESSEE to insist upon the strict performance by the
other of any term, covenant or condition of this lease or to exercise any right or remedy
consequent upon a breach thereof, shall constitute a waiver of any such breach or of such
terms, covenant or condition. No waiver of any breach shall affect or alter this lease, but
each and every term, covenant and condition of this lease shall continue in full force and
effect with respect to any other then existing or subsequent breach.
ARTICLE 26.-- TIME OF ESSENCE.
Time is of the essence of this lease and of each provision.
ARTICLE 27.--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 including the last, unless the last day is a Saturday, Sunday
or a holiday, and then it is &lso excluded.
ARTICLE 28.--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 29.--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 30.--GOVERNING LAW.
This lease shall be governed by, construed and enforced in accordance with the
laws of the State of Alaska.
ARTICLE 31.--PARTIAL INVALlDllY.
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.
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ARTICLE 32.-REI.ATlONSHIP OF PARTIES.
Nothing contained in this lease shall be deemed or construed by the parties or by
any third person to create the relationship of Frycipal and agent or of partnership or of
joint venture or of any association between C 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 33.--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.
ARTICLE 34.--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 35.--MANDATORY AND PERMISSIVE.
"Shall", "will" and "agrees" are mandatory; "may" is permissive.
ARTICLE 36.--CAPTIONS.
Captions of the paragraphs and subparagraphs of this lease are for convenience
and reference only, and the words contained therein shall in no way be held to explain,
modify, amplify or aid in the interpretation, construction or meaning of the provisions of
this lease.
ARTICLE 37.--AMENDMENT.
This lease is not subject to amendment except in writing executed by both parties
hereto.
ARTICLE 38.--DELIVERY OF NOTICES - METHOD AND TIME.
All notices, demands or requests form one party to another shall be delivered in
person or be sent by mail, certified or registered, postage prepaid, to the addresses stated
in paragraph 36 and shall be deemed to have been given at the time of delivery or mailing.
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ARTICLE 39.-NOTICES.
All notices, demands and requests from LESSEE to CITY shall be given to CITY
at the following address:
City Manager
City of Seward
P.O. Box 167
Seward, AK 99664
All notices, demands or requests from CITY to LESSEE shall be given to
LESSEE at the following address:
ARTICLE 40...CHANGE OF ADDRESS.
Each party shall have the right, from time to time, to designate a different address
by notice given in conformity with this paragraph.
ARTICLE 41...GENERATION OF ELECfRlCI1Y.
References are made in this Lease Agreement to an electric co-generation facility.
LESSEE intends to generate electric power and steam for its own use in its forest
products manufacturing facility and to provide LESSEE with an economical and
environmentally acceptable method of disposal of wood waste material generated in the
operation of the forest products manufacturing facility. LESSEE may from time to time
be capable of generating electric power in excess of its requirements.
CITY does not believe that LESSEE can compel CITY to purchase electric power
generated by LESSEE, but CITY does not wish to expose itself to that possibility.
LESSEE is willing to waive its present and future rights to compel CITY to purchase
LESSEE's electric power, provided that it may do so without violating any statute or
regulation. Therefore, LESSEE waives, to the extent it may without regulatory approval,
any rights it has or may later acquire to compel CITY to purchase electric power
generated by LESSEE.
City agrees to purchase as needed LESSEE's excess electric power and enter into
good faith negotiations within twelve months from the effective date of this lease
regarding such purchase provided that: (1) would not increase CITY's average cost of
purchased electric power, and (2) the power would not cost more than power which could
be purchased from other sources, and (3) would not require CITY, without City's prior
written approval, to make additional capital expenditures or incur additional operating
expenses, and (4) would not interfere with CITY's contractual relationships with its
current electric power suppliers, and (5) would not cause other damages or problems for
CITY, and (6) the excess electric power meets health and safety standards, voltage and
frequency standards, and other requirements imposed by CITY as reasonably necessary
to the operation of CITY's electric utility system.
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IN WITNESS WHEREOF, the parties hereto have set their hands and seals the
date first hereinbefore set forth.
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