Exhibit 10.11
Anchorage Terminal 1 Sublease
TERMINAL SUBLEASE
BETWEEN
TESORO ALASKA COMPANY
AS LANDLORD
AND
TESORO ALASKA LOGISTICS LLC
AS TENANT

 

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Anchorage Terminal 1 Sublease
TERMINAL SUBLEASE
     This Terminal Sublease (this “Sublease”) is entered into as of April 26,
2011, between Tesoro Alaska Company, a Delaware corporation (“Landlord”), and
Tesoro Alaska Logistics LLC, a Delaware limited liability company (“Tenant”).
     WHEREAS, pursuant to that certain Ground Lease, dated as of April 25, 1992
(as may be amended, modified or supplemented from time to time, the “Master
Lease”), by and between Alaska Railroad Corporation (the “Master Lessor”) and
Landlord, as lessee, Landlord has leased from Master Lessor that certain real
property, together with all improvements located thereon, situated in Anchorage,
Alaska, commonly known as Anchorage Terminal 1 and more particularly described
on Exhibit A attached hereto and incorporated herein by reference (“Landlord’s
Property”). “Landlord’s Remaining Property” means the portion of Landlord’s
Property that will be retained by Landlord and not subject to this Sublease to
Tenant.
     WHEREAS, Tenant desires to lease from Landlord and Landlord desires to
sublease to Tenant the portion of Landlord’s Property commonly known as the
Terminal and more particularly described on Exhibit B attached hereto and
incorporated herein by reference, together with all improvements leased from
Master Lessor situated thereon (the “Premises”). Improvements not owned by
Landlord include (i) the improvements previously owned by Landlord and being
transferred to Tenant by separate conveyance concurrently herewith; (ii) the
transmix tank and pipelines, utilities and equipment attached thereto owned by
Tesoro Alaska Pipeline Company located at the southeast corner of the land
described on Exhibit B (the “Transmix Facilities”), and (iii) the improvements
retained by Master Lessor under the Master Lease.
     WHEREAS, in order for Tenant to have access to the Premises for pedestrian
and vehicular ingress and egress and for certain utilities, Tenant may need to
enter upon a portion of Landlord’s Remaining Property.
     WHEREAS, in order for Landlord to have access to Landlord’s Remaining
Property, Landlord may need to enter upon a portion of the Premises.
     ARTICLE 1. DEMISE OF PREMISES AND ACCESS EASEMENT
     1.01 Demise of Premises. In consideration of the mutual covenants and
agreements of this Sublease, and other good and valuable consideration, Landlord
demises and subleases to Tenant, and Tenant subleases from Landlord, the
Premises, reserving unto Landlord (i) an easement appurtenant to Landlord’s
Remaining Property for the use, operation, maintenance, repair and replacement
of the Transmix Facilities, including without limitation an easement for ingress
to and egress from the portion of the Premises on which the Transmix Facilities
are located (the “Transmix Facilities Easement”) and (ii) an easement
appurtenant to Landlord’s Remaining Property for pedestrian and vehicular
ingress and egress to and from the Landlord’s Remaining Property over and across
the portion of the Premises adjacent to Landlord’s Remaining Property used by
Tenant for pedestrian and vehicular ingress and egress to and from the Premises.
Tenant acknowledges that concurrently herewith, Landlord intends to sublease to
Tesoro Alaska Pipeline

 

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Company the portion of Landlord’s Remaining Property benefited by the Transmix
Facilities Easement.
     1.02 Access Easement. Landlord grants Tenant an easement for pedestrian and
vehicular ingress and egress to and from the Premises and for utility access
over and across Landlord’s Remaining Property as reasonably needed by Tenant in
order to operate the Premises. Landlord shall have the right to designate a
reasonable course through which Tenant and its employees, agents, contractors
and invitees must follow across Landlord’s Remaining Property in order to access
the Premises, and to otherwise establish reasonable restrictions upon Tenant’s
use of Landlord’s Remaining Property for access to the Premises.
     1.03 Master Lease. This Sublease is and shall be subject to and subordinate
to the Master Lease. During the term of this Sublease and for all subsequent
periods for obligations which have arisen prior to the termination of this
Sublease, Tenant does hereby expressly assume and agree to perform and comply
with, for the benefit of Landlord and Master Lessor, each and every obligation
of the Landlord under the Master Lease insofar as the same is applicable to the
Premises and the easements over the Landlord’s Remaining Property, other than
the obligation to pay rent to the Master Lessor. Tenant agrees to attorn to
Master Lessor if Landlord defaults under the Master Lease and if Tenant is
notified of Landlord’s default and is instructed by Master Lessor to make
Tenant’s rental payments to Master Lessor. If for any reason the Master Lease is
terminated, including but not limited to a termination caused by Landlord’s
default under the Master Lease, this Sublease shall automatically terminate, and
any obligations of Landlord to Tenant shall be terminated.
     ARTICLE 2. SUBLEASE TERM
     2.01 Term. Unless terminated sooner as provided in this Sublease, the term
of this Sublease begins on the date of this Sublease and ends on December 31,
2011. Tenant may, at its option, extend the term of this lease for three
(3) additional lease terms of five (5) years each, subject to all the provisions
of this Lease; provided, however, that no extension of this Sublease shall be
for a term that ends after December 31, 2026, which is the last possible
expiration date of the Master Lease if all available extension options are
exercised by Landlord thereunder. The terms and conditions on which the
extension options may be exercised shall be the same as those set forth in
Section 1.06 of the Master Lease; provided, however, that the written notice of
exercise shall be given not more than 395 days and not less than 210 days before
the last day of the previous Lease Term. If Tenant exercises an extension option
in accordance with this Lease, Landlord shall exercise the applicable option to
extend under the Master Lease.
     2.02 Termination. This Sublease will terminate without further notice on
the earlier of (i) when the term specified in Section 2.01, as extended,
expires, and (ii) if and when Landlord’s right, title and interest in Landlord’s
Property and/or Premises are terminated; and any holding over by Tenant after
that term expires will not constitute a renewal of this Sublease or give Tenant
any rights under this Sublease in or to the Premises.

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     2.03 Holdover. If Tenant holds over and continues in possession of the
Premises after the Sublease term, Tenant will be considered to be occupying the
Premises at will, subject to all the terms of this Sublease.
     2.04 Surrender of Premises. Tenant shall surrender the Premises by the end
of the last day of the Sublease term or any earlier termination date.
     ARTICLE 3. RENT
     3.01 Basic Rent. Tenant shall pay to Landlord in legal tender of the United
States of America seventy-eight percent (78%) of the Basic Rent payable by
Landlord to Master Lessor from time to time under the Master Lease, including
without limitation the Basic Rent payable during any extended lease term,
without deduction and without notice or demand, and in equal quarterly
installments in advance on or before the first day of each calendar quarter,
with partial periods prorated on a daily basis.
     ARTICLE 4. COMPLIANCE WITH LAWS
     Tenant and its employees, agents and invitees shall comply with all
applicable federal, state, and local laws, rules, regulations and orders in use
of the Premises. Tenant shall secure and maintain current all required permits,
licenses, certificates, and approvals relating to its use of the Premises.
Landlord shall comply with all applicable federal, state, and local laws, rules,
regulations and orders pertaining to the operation of Landlord’s Remaining
Property and the Premises to the extent reasonably necessary to enable Tenant to
exercise its rights provided hereunder.
     ARTICLE 5. DEFAULT AND REMEDIES
     5.01 Termination on Default. Except as otherwise specifically noted in this
Sublease to the contrary, if Tenant defaults in performing any covenant or term
of this Sublease and does not correct the default within thirty (30) days after
receipt of written notice from Landlord to Tenant, Landlord may declare this
Sublease, and all rights and interest created by it, terminated; provided,
however, that in the event such default cannot, in the exercise of reasonable
diligence, be cured within such thirty (30) day period, Landlord may not
exercise its remedies under this Article unless Tenant (i) fails to commence the
cure of the default within such thirty (30) day period, or (ii) thereafter fails
to proceed with curative measures with reasonable diligence. If Landlord elects
to terminate, this Sublease will cease as if the day of Landlord’s election were
the day originally fixed in this Sublease for its expiration, and Landlord or
its agent or attorney may resume possession of the Premises.
     5.02 Other Remedies. Any termination of this Sublease as provided in this
Article 5 will not relieve Tenant from paying any sum or sums due and payable to
Landlord under this Sublease at the time of termination, or any claim for
damages then or previously accruing against Tenant under this Sublease. Any such
termination will not prevent Landlord from enforcing the payment of any such sum
or sums or claim for damages by any remedy provided for by law, or from
recovering damages from Tenant for any default under this Sublease. All
Landlord’s rights, options, and remedies under this Sublease will be construed
to be cumulative, and no one of them is exclusive of the other. Landlord may
pursue any or all such remedies or any other remedy or relief provided by

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law, whether or not stated in this Sublease. No waiver by Landlord of a breach
of any of the covenants or conditions of this Sublease may be construed a waiver
of any succeeding or preceding breach of the same or any other covenant or
condition of this Sublease.
      ARTICLE 6. QUIET ENJOYMENT
     Landlord covenants that as long as Tenant observes the covenants and terms
of this Sublease, Tenant will lawfully and quietly hold, occupy, and enjoy the
Premises during the Sublease term without being disturbed by Landlord or any
person claiming under Landlord, except for any portion of the Premises that is
taken under the power of eminent domain.
      ARTICLE 7. GENERAL PROTECTIVE PROVISIONS
     7.01 Right of Entry and Inspection. Tenant must permit Landlord or its
agents, representatives, or employees to enter the Premises at reasonable times
and upon reasonable prior notice for the purposes of inspection; determining
whether Tenant is complying with this Sublease; and maintaining, repairing, or
altering the Premises in accordance with the terms hereof.
     7.02 No Partnership or Joint Venture. The relationship between Landlord and
Tenant is at all times solely that of landlord and tenant and may not be deemed
a partnership or a joint venture.
     7.03 No Waiver. No waiver by either party of any default or breach of any
covenant or term of this Sublease may be treated as a waiver of any subsequent
default or breach of the same or any other covenant or term of this Sublease.
     7.04 Release of Landlord. If Landlord transfers all or part of the Premises
and as a part of the transaction assigns its interest as Landlord in this
Sublease, then as of the effective date of the assignment or transfer, Landlord
will have no further liability under this Sublease to Tenant, except with
respect to liability matters that have accrued and are unsatisfied as of that
date. Underlying this release is the parties’ intent that Landlord’s covenants
and obligations under this Sublease will bind Landlord and its successors and
assigns only during and in respect of their respective successive periods of
ownership of the fee.
     ARTICLE 8. MISCELLANEOUS
     8.01 Memorandum of Sublease. The parties agree not to place this Sublease
of record, but each party shall, at the request of the other, subject to the
consent rights of the Master Lessor, execute and acknowledge so that the same
may be recorded a memorandum of sublease containing such provisions as the
requesting party shall reasonably request. The requesting party shall pay all
costs, taxes, fees and other expenses in connection with or prerequisite to
recording.
     8.02 Delivery of Notices. All sums owed hereunder, notices, demands, or
requests from one party to another may be personally delivered or sent by mail,
certified or registered, postage prepaid, to the addresses stated below and are
considered to have been given at the time of personal delivery or of mailing:

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If to Landlord:
 
If to Tenant:
Tesoro Alaska Company
 
Tesoro Alaska Logistics LLC
19100 Ridgewood Parkway
 
19100 Ridgewood Parkway
San Antonio, Texas 78259
 
San Antonio, Texas 78259
Attn: Michael S. Reames,
 
Attn: Michael S. Reames,
Manager, Right of Way & Land
 
Manager, Right of Way & Land
Telecopy: (210) 745-4454
 
Telecopy: (210) 745-4454

     A party may change its address for notice under this Section 8.02 by
providing notice of such change in accordance with this Section 8.02.
     8.03 Parties Bound. This agreement binds, and inures to the benefit of, the
parties to this Sublease and their respective heirs, executors, administrators,
legal representatives, successors, and assigns.
     8.04 Governing Law. This agreement is to be construed under the internal
laws of the State of Alaska.
     8.05 Legal Construction. If any one or more of the provisions contained in
this Sublease are for any reason held to be invalid, illegal, or unenforceable
in any respect, the invalidity, illegality, or unenforceability will not affect
any other provision of this Sublease, which will be construed as if it had not
included the invalid, illegal, or unenforceable provision.
     8.06 Other Agreements.
     (a). This Sublease and the other documents executed by Landlord and Tenant
concurrently herewith constitute the parties’ sole agreement with respect to the
subject matter of this Sublease and such agreements supersede any prior
understandings or written or oral agreements between the parties with respect to
the subject matter of this Sublease.
     (b). In the event of any conflict between the provisions of this Sublease
and the provisions of the Master Lease, the provisions of this Sublease shall
control the respective rights and obligations of Landlord and Tenant under this
Sublease.
     8.07 Amendment. No amendment, modification, or alteration of this Sublease
is binding unless in writing, dated subsequent to the date of this Sublease, and
duly executed by the parties.
     8.08 Rights and Remedies Cumulative. The rights and remedies provided by
this Sublease are cumulative, and either party’s using any right or remedy will
not preclude or waive its right to use any other remedy. The rights and remedies
are given in addition to any other rights the parties may have by law, statute,
ordinance, or otherwise.
     8.09 Attorney’s Fees and Costs. If, as a result of either party’s breaching
this Sublease, the other party employs an attorney to enforce its rights under
this Sublease, then the breaching or

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defaulting party will pay the other party the reasonable attorneys’ fees and
costs incurred to enforce this Sublease.
     8.10 Time of Essence. Time is of the essence of this Sublease.
     8.11 Further Documents. Landlord and Tenant will from time to time and at
any reasonable time execute and deliver to the other party, when the other party
reasonably requests, other instruments and assurances approving, ratifying, and
confirming this Sublease and the leasehold estate created by it and certifying
that this Sublease is in full force and that no default under this Sublease on
the other party’s part exists; or if the other party is in default specifying in
such instrument each such default.
     8.12 Captions. The captions used in connection with the Articles and
Sections of this Sublease are for convenience only, and are not intended in any
way to limit or amplify the meaning of the language contained in this Sublease,
or be used as interpreting the meanings and provisions of this Sublease.
     8.13 Construction. This Sublease shall not be strictly construed against
either party.
[signature page follows]

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Anchorage Terminal 1 Sublease
     THIS SUBLEASE has been executed by the parties on the date and year first
above written.

            LANDLORD:

TESORO ALASKA COMPANY,
a Delaware corporation
      By:   /s/ Gregory J. Goff         Name:   Gregory J. Goff        Title:  
President        TENANT:

TESORO ALASKA LOGISTICS LLC,
a Delaware limited liability company
      By:   /s/ Phillip M. Anderson         Name:   Phillip M. Anderson       
Title:   President     

[signature page to Anchorage Terminal 1]

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Anchorage Terminal 1 Sublease
EXHIBIT A
Legal Description of Landlord’s Property
Said leasehold affects the following real property:
A parcel of land located within the ALASKA RAILROAD TERMINAL RESERVE, situated
in the Anchorage Recording District, Third Judicial District, State of Alaska,
more particularly described as follows:
Lots 10 and 11A of the Port of Anchorage Subdivision according to Plats Number
64-56 and 70-309, respectively, on file in the office of the District Recorded,
Anchorage Recording District, Alaska, along with the unsubdivided lands adjacent
to and Easterly of said Lots 10 and 11A. The boundaries of said unsubdivided
parcel are the East boundary line of said Lots 10 and 11A and the West
right-of-way line of the Anchorage Port Road (provided, however, there is
reserved to the Railroad a pipeline easement 40 feet wide which easement is
located Westerly of and parallel and adjacent to the West right-of-way of the
aforesaid Anchorage Port Road).

A-1

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EXHIBIT B
Legal Description of Premises
This Sublease affects the following real property:
A parcel of land located within Alaska Railroad Lease No. 4392 (recorded in Book
2267 on Page 547), Alaska Railroad Terminal Reserve, Section 7, Township 13
North, Range 3 West, Seward Meridian, Anchorage Recording District (A.R.D.),
Third Judicial District, State of Alaska, and more particularly described as
follows:
Commencing at the Northeast corner of Lot 11A, Port of Anchorage Subdivision,
Plat No. 70-309 A.R.D. marked with a 2” Aluminum Cap, being on the West Right of
Way (R.O.W.) line of Anchorage Port Road and the TRUE POINT OF BEGINNING; thence
S 07°19’49” W along said West R.O.W. line a distance of 512.65 feet; thence N
82°40’12” W a distance of 84.66 feet; thence S 58°13’21” W a distance of 74.22
feet; thence S 18°39’42” W a distance of 24.07 feet; thence S 12°49’23” W a
distance of 223.17 feet; thence N 89°09’28” W a distance of 20.88 feet; thence N
00°48’43” W a distance of 12.18 feet; thence N 88°41’26” W a distance of 130.57
feet to the West property line of Lot 10, Port of Anchorage Subdivision, Plat
No. 64-56 A.R.D; thence N 02°49’22” W along said West property line being
contiguous with the West Property line of said Lot 11A distance of 742.30 feet;
thence N 19°55’08” E along said West property line of Lot 11A a distance of
21.28 feet to the Northwest corner of said Lot 11A, being on the South property
line of Tract G, Port of Anchorage Subdivision, Plat No. 2004-10 A.R.D.; thence
N 89°57’53” E along the property line of said Lot 11A and said Tract G a
distance of 450.60 feet to the Northeast corner of said Lot 11A and the TRUE
POINT of BEGINNING.
Containing 258,960 Square Feet (5.945 Acres), more or Less