Memo - Negotiations with GPS Development - Block 64
I Economic Development I
MEMORANDUM
TO: Honorable Mayor and. City Council
j}
FROM:~p(jim Kerrigan, Director of Planning & Economic Development
DATE: July 12, 2005
SUBJECT: Status of negotiations with GPS Development, re: Block 64 Project
GPS Development is proposing to undertake a mixed-use redevelopment project on the block
bounded by Fifth and Sixth Avenues North, north of Mainstreet and south of First Street North
(Block 64). The project as detailed would involve the construction of approximately 220
condominium units and 6,800 square feet of retail space. GPS is requesting tax increment
assistance to make the project financially feasible. To facilitate the project, the following needs
to occur:
. Execution of a development agreement with GPS Development, LLC
. Execution of a tax increment revenue note (pay-as-you-go note)
The development agreement details the responsibilities of both the City/HRA and the developer.
Specifically addressed are the following:
. Scope of work
. Parameters of TIF assistance
. Timing for completion of various actions to facilitate the project
. Default provision
* Requirements to be satisfied for the City to utilize its eminent domain authority to
acquire property
Attached is a development agreement that has been negotiated between staff and GPS
Development, LLC, which addresses the above issues. Bob Deike of Bradley & Deike,
who drafted the agreement, has prepared the sUmmary of this docum~nt. (The
summary is attached to this memo.) Also attached is a risk analysis from Sid Inman of
Ehlers & Associates as relates to the City's exposure based on the terms of the
agreement. Both Mr. Inman and Mr. Deike will be present at the meeting.
At the July 19 Council meeting, staff will provide an overview of this agreement with
action on July 26. At this same meeting, staff is recommending that the public hearing
be continued for consideration of the establishment of Tax Increment Financing District
1-3.
Attachments
July 14,2005
CONTRACT
FOR
PRIVATE REDEVELOPMENT
By and Between
HOUSING AND REDEVELOPMENT AUTHORITY
IN AND FOR THE
CITY OF HOPKINS
and
GPS DEVELOPMENT, LLC
Dated:
,2005
This document was drafted by:
BRADLEY & DEIKE, P. A.
4018 West 65th Street, Suite 100
Edina, MN 55435
Telephone: (952) 926-5337 .
TABLE OF CONTENTS
Page
PREAMBLE .......................................................................................................................1
ARTICLE I
Definitions
Section 1.1. Definitions ............................................ ....... ................. ...... ........ ...................3
Section 2.1.
Section 2.2.
Section 3.1.
Section 3.2.
Section 3.3.
Section 3.4.
Section 3.5.
Section 3.6.
Section 3.7.
Section 3.8.
Section 3.9.
Section 3.10.
Section 3.11.
Section 4.1.
Section 4.2.
Section 4.3.
ARTICLE II
Representations
Representations by the Authority .................................................................. 7
Representations by the Redeveloper..............................................................8
ARTICLE III
Development Proposal: Public Redevelopment Costs
Development Proposal......................... .... ...... .................................. .... ..... .....9
Development Actions.. .......................... ............................ ............................9
Acquisition of Acquisition Property ..............................................................10
Conditions Precedent to Authority's Initiation of Eminent Domain Action .13
Conveyance of Property .......................... ....... ......... ........... ...................... ......14
Public Redevelopment Costs .........................................................................16
Issuance of Notes ................................. ............................................ ...... ........16
Conditions Precedent to Issuance of the Note, Refunding Note and
Excess Costs Note... ...... ............................. .................. .......................... ........19
Payment of Authority's Costs........................................................................19
Adjustment of Note Amount................ .......................... ..... .... ...................... .20
Business Subsidy Agreement......................................... ...... .................. ... .....21
ARTICLE IV
Construction of Minimum Improvements
Construction and Operation of Minimum Improvements..............................22
Construction Plans; Planning Approvals .......................................................22
Commencement and Completion ofConstruction.........................................23
ARTICLE V
Insurance
Section 5.1. Insurance.. .................................. ....................................................................25
Section 6.1.
Section 6.2.
Section 6.3.
Section 7.1.
Section 7.2.
Section 8.1.
Section 8.2
Section 8.3.
Section 9.1.
Section 9.2.
Section 9.3.
Section 9.4.
Section 9.5.
Section 9.6.
ARTICLE VI
Taxes; Tax Increment
Real Property Taxes .......................................................................................28
Creation of Tax Increment District ...............................................................28
Tax Increment ... .................... ... ...... ................... ............ .................................28
ARTICLE VII
Financing
Financing ......... ................. ................................................... ... .......................29
Limitation on Encumbrance of Property ............,..........................................29
ARTICLE VIII
Prohibitions Against Assignment and Transfer; Indemnification
Prohibition Against Transfer of Property and Assignment of Agreement ....30
Release and Indemnification Covenants........................................................30
Indemnification for Relocation Claims..........................................................21
ARTICLE IX
Events of Default
Events of Default Defined .............................................................................32
Authority's Remedies on Default ... ...... ....................................... .... ...............32
Revesting of Title in Authority ......................................................................32
No Remedy Exclusive ............................................................. ......................32
No Additional Waiver Implied by one Waiver..............................................33
Costs of Enforcement................. .... ... .......... ..... .................... ...... ....................33
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ARTICLE X
Additional Provisions
Section 10.1. Representatives Not Individually Liable .......................................................34
Section 10.2. Equal Employment Opportunity....................................................................34
Section 10.3. Titles of Articles and Sections.......................................................................34
Section 10.4. Notices and Demands ....................................................................................34
Section 10.5. Disclaimer of Relationships .................... ................................................... ....34
Section 10.6. Modifications ............................................................................ ..... ................35
Section 10.7. Counterparts ................ ........................ .......................... ............................... ..35
Section 10.8. Judicial Interpretation ....................................................................................35
Section 10.9. Effect of Terrnination........................................................ ...................... .......35
SCHEDULE A
SCHEDULE B
SCHEDULE C
SCHEDULE D
SCHEDULE E
SCHEDULE F
SCHEDULE G
SCHEDULE H
Description of Redevelopment Property
Note
Description of Site Improvements
Sources and Uses
Documentation for City Review of Feasibility of Compliance with Building
Code
Environmental Due Diligence Memorandum
Environmental Due Diligence Schedule
Escrow Agreement
Hi
CONTRACT FOR PRfVATE REDEVELOPMENT
THIS AGREEMENT, made on or as of the day of ,2005, by and
between the Housing and Redevelopment Authority in and for the City of Hopkins, a public
body corporate and politic (hereinafter referred to as the "Authority"), established pursuant to
Minnesota Statutes. sections 469.001-469.047 (hereinafter referred to as the "Act"), and having
its principal office at 1010 First Street South, Hopkins, Minnesota 55343, and GPS
Development, LLC, a Minnesota limited liability company (hereinafter referred to as the
"Redeveloper"), having its principal office at 15 Sixth Avenue North, Hopkins, Minnesota
55343.
WITNESSETH:
WHEREAS, the Authority was created pursuant to the Act and was authorized to
transact business and exercise its powers by a resolution of the City Council of the City of
Hopkins (the "City") pursuant to Section 469.003 of the Act; and
WHEREAS, in furtherance of the objectives of the Act, the Authority has undertaken a
program for the clearance and reconstruction or rehabilitation of blighted, deteriorated,
deteriorating, vacant, unused, under used or inappropriately used, areas of the City, and in this
connection is engaged in carrying out a redevelopment project known as the Hopkins
Redevelopment Project No. I (hereinafter referred to as the "Project") in an area (hereinafter
referred to as the "Project Area") located in the City; and
WHEREAS, as of the date of this Agreement there has been prepared and approved by
the Authority and the City Council of the City a redevelopment plan for the Project (which Plan
is hereinafter referred to as the "Redevelopment Plan"); and
WHEREAS, the Redeveloper has presented to the Authority a proposal for the
redevelopment of certain real property located within the Project Area (which real property is
referred to herein as the "Redevelopment Property") through the construction of a mixed use
commercial/residential development, which proposal involves the Authority's use of tax
increment pursuant to this Agreement to reimburse the Redeveloper for a portion of the cost of
acquiring the Redevelopment Property, preparing it for development and constructing site
improvements to serve the new development; and
WHEREAS, the Redeveloper has requested that the Authority assist its development by
paying certain public redevelopment costs that will be incurred to prepare the Redevelopment
Property for construction of the Minimum Improvements; and
WHEREAS, the Authority has approved within the Project Area its Tax Increment
Financing District No. 1-3 (the "Tax Increment District") pursuant to Minnesota Statutes.
Sections 469.174-.179, in order to create a funding source to finance the public redevelopment
,costs of the Project; and
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WHEREAS, the Authority believes that the development of the Project Area pursuant to
the Redeveloper's proposal and the fulfillment generally of this Agreement, are in the vital and
best interests of the City and the health, safety, morals, and welfare of its residents, and in accord
with the public purposes and provisions of the applicable State and local laws and requirements
under which the Project has been undertaken and is being assisted, and is, therefor, willing to
provide the financial assistance outlined herein.
NOW, THEREFORE, in consideration of the premises and the mutual obligations of the
parties hereto, each of them does hereby covenant and agree with the other as follows:
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ARTICLE I
Definitions
Section 1.1. Definitions. In this Agreement, unless a different meaning clearly appears
from the context:
"Act" means Minnesota Statutes. Sections 469.001-469.047, as amended.
"Acquisition Property" means that portion of the Redevelopment Property described as
such on the attached Schedule A which is proposed to be acquired pursuant to Article III of this
Agreement.
"Agreement" means this Agreement, as the same may be from time to time modified,
amended, or supplemented.
"Authority" means the Housing and Redevelopment Authority In and For the City of
Hopkins, or any successor or assign.
"Available Tax Increment" means ninety five percent (95%) of the Tax Increment that is
received by the Authority in the six (6) month period immediately preceding a Scheduled
Payment Date.
"City" means the City of Hopkins.
"Construction Plans" means the plans, specifications, drawings and related documents
described in Section 4.2(b) of this Agreement.
"County" means Hennepin County, Minnesota.
"Design Standards" means the City's design standards for the overlay disttict.
"Eligible Costs" means costs of acquisition, relocation and improvements on or adjacent
to the Redevelopment Property, eligible for reimbursement by the Authority with Tax Increment
under the Tax Increment Act.
"Escrow Agreement" means the Indemnification and Escrow Agreement to be executed
by the Redeveloper and the Authority pursuant to Section 3.3(e) of this Agreement, the form of
which is attached to this Agreement as Schedule H.
"Event of Default" means an action by the Redeveloper listed in Article IX of this
Agreement.
"Excess Costs Note" means the tax increment revenue note that may be issued by the
Authority as described in Section 3.7 (e) of this Agreement.
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"Holder" means the owner of a Mortgage.
"Maturity Date" means the date that the Notes terminate or are paid in full, whichever
occurs earlier.
"Minimum Improvements" means the construction by the Redeveloper of all of the
improvements to the Redevelopment Property contemplated by this Agreement, including 220
for sale residential units and approximately 7,900 square feet of retaiVconnnercial space and
related improvements, all in accordance with the Construction Plans.
"Mortgage" means any mortgage obtained by the Redeveloper which is secured, in whole
or in part, by the Redevelopment Property and which is a permitted encumbrance pursuant to the
provisions of Article VIII ofthis Agreement.
"Net Proceeds" means any proceeds paid by an insurer to the Redeveloper under a policy
or policies of insurance required to be provided and maintained by the Redeveloper pursuant to
Article V of this Agreement and remaining after deducting all expenses (including fees and
disbursements of counsel) incurred in the collection of such proceeds.
"Net Refunding Note Proceeds" means the principal amount of any Refunding Note minus
capitalized interest and all costs of issuance of the Refunding Note approved by the Authority, in
its reasonable discretion.
"Note" or "Notes" means the taxable tax increment revenue note or notes to be issued by
the Authority to the Redeveloper pursuant to Article III of this Agreement to reimburse the
Redeveloper for its payment of the Public Redevelopment Costs.
"Permitted Encumbrances" means the following encumbrances on the title to the
Acquisition Property: (i) such encumbrances as are agreed to by the Authority and the
Redeveloper; (ii) covenants, conditions, restrictions, declarations and easements of record, if
any; (iii) governmental regulations, if any, affecting the use and occupancy of the Property and
Improvements; (iv) zoning laws of the City, County and State; (v) reservations to the State, in
trust for the taxing districts concerned, of minerals and mineral rights in those portions of the
Acquisition Property, the title to which may have at any time heretofore been forfeited to the
State for nonpayment of real estate taxes.
"Phase" or "Phases" mean Phase I, Phase II and/or Phase III.
"Phase I" means that portion of the Minimum Improvements consisting of the
construction of 72 residential units consisting of approximately 106,000 aggregate square feet for
occupancy by persons 55 years of age or older and approximately 7,900 square feet of
retaiVcommercial space and related improvements.
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"Phase II" means that portion of the Minimum Improvements consisting of the
construction of80 residential units consisting of approximately 106,000 aggregate square feet for
occupancy by persons 55 years of age or older.
"Phase III" means that portion of the Minimum Improvements consisting of the
construction of70 residential units consisting of approximately 101,000 aggregate square feet for
occupancy by persons 55 years of age or older.
"Project" means the Authority's Redevelopment Project No. I.
"Project Area" means the real properly located within the boundaries of the Project.
"Public Redevelopment Costs" means' those Eligible Costs to be incurred by the
Redeveloper in connection with the acquisition and redevelopment of the Redevelopment
Property to be paid by the Redeveloper and reinlbursed by the Authority with Available Tax
Increment pursuant to this Agreement, which costs are described on Schedule C to this
Agreement.
"Redeveloper" means GPS Development, LLC, a Minnesota limited liability company, or
its successors and assigns, or any future owners of the Redevelopment Property.
"Redeveloper Properly" means that portion of the Redevelopment Property described as
such on the attached Schedule A.
"Redevelopment Propeliy" means the real property described in Schedule A of this
Agreement, consisting of the Redeveloper Propeliy and the Acquisition Property.
"Redevelopment Plan" means the Authority's Redevelopment Plan for the Project, as
amended as of the date of this Agreement.
"Refunding Note" means the tax increment revenue note that may be issued by the
Authority to refund the Note as described in Section 3.7(d) of this Agreement.
"Scheduled Payment" means a Scheduled Payment as defined in the Note.
"Scheduled Payment Date" means a Scheduled Payment Date as defined in the Note.
"State" means the State of Minnesota.
"Tax Increment" means that portion of the real property taxes paid with respect to the
Redevelopment Property and Minimum Improvements which is paid by the County to the
Authority, minus amounts required by law to be deducted by or paid to other governmental
entities.
"Tax Increment Act" means Minnesota Statutes, Section 469.174-469.179, as the same
may be amended from time to time.
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"Tax Increment District" means the Authority's Tax Increment District No. 1-3.
"Tax Official" means any City or County assessor; County auditor; City, County or State
board of equalization, the commissioner of revenue of the State, or any State or federal district
court, the tax court of the State, or the State Supreme Court.
"Unavoidable Delays" means delays beyond the reasonable control of the party seeking
to be excused as a result thereof which are the result of acts of God, adverse weather conditions,
strikes, other labor troubles, delays in obtaining construction materials, machinery and/or
equipment, fire or other casualty to the Minimum Improvements, litigation commenced by third
parties which, by injunction or other similar judicial action, results in delays, or acts of any
federal, state or local governmental unit (other than the Authority in enforcing its rights under
this Agreement) which result in delays. Delays in obtaining financing and delays caused by
general market conditions shall not constitute Unavoidable Delays, except for delays in obtaining
financing due to environmental issues affecting the Project Area which shall constitute
Unavoidable Delays. Upon the occurrence of an Unavoidable Delay, the party seeking to be
excused as a result thereof shall be excused for the period of the delay if such party gives the
other party written notice of the cause ofthe delay or intenuption within thirty (30) days after its
occurrence.
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ARTICLE II
Representations
Section 2.1. Representations bv the Authority. The Authority makes the following
representations as the basis for the undertaking on its part herein contained:
(a) The Authority is a public body corporate and politic with all the powers of
a housing and redevelopment authority duly organized and existing under the laws of the
State. Under the provisions of the Act, the Authority believes that it has the power to
enter into this Agreement and carry out its obligations hereunder, and has duly authorized
the execution, delivery and perfonnance of this Agreement by action of its Board of
Commissioners.
(b) The activities of the Authority are undertaken pursuant to the Act and are
undertaken in accordance with the Redevelopment Plan in furtherance of the objectives
of the Project and the Redevelopment Plan which include, but are not limited to, the
purposes of clearing blighted, deteriorated, deteriorating, under used and inappropriately
used areas of the City, increasing the property tax base in the City; promoting the
development of underutilized land; eliminating and removing buildings that are
economically or functionally obsolete; producing housing for persons 55 years of age and
older, providing maximum opportunity, consistent with the sound needs of the City as a
whole for redevelopment by private enterprise; and providing general design guidance in
conjunction with suitable development controls in order to enhance the physical
environment of the area.
(c) To the best of the Authority's knowledge and belief, the Project is a
"redevelopment project" within the meaning of the Act and was created, adopted and
approved in accordance with the terms of the Act.
(d) The Authority will, at no cost to the Authority, cooperate with the
Redeveloper with respect to any litigation conunenced with respect to the Plan, Project,
or Minimum Improvements.
( e) The Authority will, at no cost to the Authority, cooperate with and assist
the Redeveloper in obtaining governmental approvals, permits and authorizations
necessary to construct the Minimum Improvements.
(f) There are no pending or threatened legal proceedings of which. the
Authority is aware which if successful would threaten the economic viability of the
Authority or the validity or enforceability of this Agreement or which would restrain or
enjoin the transactions contemplated by this Agreement; provided that the Authority has
received notice from the owner of the Acquisition Property that such owner objects to the
creation of the Tax Increment District on the grounds, among other things, that the Tax
Increment District does not qualify as a redevelopment tax increment district under the
Tax Increment Act.
7
that:
(g) Neither the execution and delivery of this Agreement, the consummation
of the transactions contemplated hereby, nor the fulfillment of or compliance with the
terms and conditions of this Agreement is prevented, limited by or conflicts with or
results in a breach of, the terms, conditions or provisions of any corporate restriction or
any evidences of indebtedness, agreement or instrument of whatever nature to which the
Authority is now a party or by which it is bound, or constitutes a default under any of the
foregoing.
Section 2.2. Representations bv the Redeveloper. The Redeveloper represents
(a) The Redeveloper is a limited liability company duly organized and
authorized to transact business in the State, is not in violation of any provisions of its
articles of organization, member control agreement, bylaws or the laws of the State, has
power to enter into this Agreement and has duly authorized the execution, delivery and
performance of this Agreement by proper action of its members.
(b) If the Redeveloper acquires the Redevelopment Property pursuant to the
terms of this Agreement, the Redeveloper will construct the Minimum Improvements in
accordance with the tenns of this Agreement, the Redevelopment Plan and all local, state
and federal laws and regulations (including, but not limited to, enviromnental, zoning,
building code and public health laws and regulations), subject to variances necessary to
construct the improvements contemplated in the Construction Plans approved by the
Authority.
(c) Except for facts disclosed in any environmental assessment or report
prepared on behalf of the Authority or the Redeveloper, the Redeveloper has received no
notice or communication from any local, state or federal official that the activities of the
Redeveloper or the Authority in the Project Area may be or will be in violation of any
envirorunental law or regulation, and the Redeveloper, to the best of its knowledge, is
aware of no facts the existence of which would cause it to be in violation of any local,
state or federal envirorunentallaw, regulation or review procedure.
(d) The Redeveloper will cooperate with the Authority with respect to any
litigation commenced with respect to the Redevelopment Plan, Project, or Minimum
Improvements.
(e) The Redeveloper would not be able to construct the Minimum
Improvements but for the execution of this Agreement and the tax increment assistance to
be provided hereunder.
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ARTICLE III
Development Proposal: Site Improvements
Section 3.1. Development Proposal. The Redevelopment Property consists of several
parcels of property with multiple owners. The Redeveloper has acquired some of the parcels of
the Redevelopment Property and has entered into purchase agreements, options or other
instruments entitling the Redeveloper to acquire other parcels of the Redevelopment Property, all
of which parcels of the Redevelopment Property are described on Schedule A to this Agreement
and are referred to herein as the "Redeveloper Property". The remaining parcels of the
Redevelopment Property are referred to herein and on Schedule A as the "Acquisition Property"
and are owned by a single owner. The Redeveloper has attempted to negotiate the terms of a
purchase agreement to acquire the Acquisition Property. The Authority has determined that the
Redeveloper's proposal for the redevelopment of the Redeveloper Propeliy and the Acquisition
Property (collectively, the "Redevelopment Property") is in the best Interests of the Authority,
the City and the City's residents and will assist the Authority and City in attaining their goals for
the Project. Therefore, the Authority is willing to assist the Redeveloper with its proposal by
using its best efforts to acquire the Acquisition Property, if requested by Redeveloper, and by
using a portion of the Tax Increment generated by the Minimum Improvements to offset a
portion of the Redeveloper's costs, all as provided for in this Agreement. Due to the high cost of
acquiring and redeveloping the Property, the Authority has determined that the Minimum
Improvements would not be constructed without the financial participation of the Authority as
proposed by the Redeveloper.
Section 3.2. Development Actions. The Redeveloper agrees to undeliake the following
actions to proceed with the development of the Minimum Improvements:
(a) Within thirty (30) days after the date of this Agreement, the Redeveloper
shall provide to the Authority for its review and approval a financial plan showing how
the Redeveloper intends to finance its acquisition of the Redevelopment Property and
construction of the Minimum Improvements, including the deposits required by section
4.3(d), (e), (f) and (g). The financial plan shall describe sources of financing, lending
institutions from which the Redeveloper intends to secure financing and contact
information for such lending institutions.
(b) Within forty five (45) days after the date of this Agreement, the
Redeveloper shall provide to the Authority such documentation as the Authority may
require to allow the Authority and its consultants to undertake a final feasibility analysis
of the Redeveloper's proposed development for the purpose of determining, to the
Authority's satisfaction, that the Redeveloper's proposed development is financially
feasible, which analysis will be for the benefit of the Authority only and neither the
Redeveloper nor any third party shall be entitled to rely thereon.
(c) Within thirty (30) days after the date of this Agreement, the Redeveloper
shall provide to the Authority a detailed description of the Redeveloper's plans for the
phasing of the construction of the Minimum Improvements, including a site plan showing
9
the Phases and showing the parking, landscaping and other improvements to be
constructed as a part of each Phase.
(d) In accordance with the schedule contained on Schedule G to this
Agreement, the Redeveloper shaH complete the environmental due diligence detailed in
the memorandum from THPA, Inc., dated March 16, 2005, a copy of which
memorandum is attached to this Agreement a$ Schedule P, and shall have prepared a plan
for the remediation of any adverse environmental conditions discovered on the
Redevelopment Property, which remediation plan shall set forth cost estimates for the
remediation based on bids from enviromnental remediation contactors.
(e) Within ninety (90) days after the date of this Agreement, the Redeveloper
shall provide to the Authority evidence in such form as the Authority may require
showing that the Redeveloper has acquired marketable title to all of the Redeveloper
Property.
(f) Within one huridred and eighty (180) days after the date of this Agreement,
the Redeveloper shall provide to the. Authority a firm commitment for financing, in a
form acceptable to the Authority, sufficient to pay an costs associated with the
acquisition of the Redevelopment Property and construction of Phase I and a financing
commitment for the construction of Phases II and III of the Minimum Improvements.
(g) Within one hundred and eighty (180) days after the date of this Agreement,
the Redeveloper shall complete a process, required by the City, of obtaining detailed
preliminary concept review of the Redeveloper's plans for the development of the
Minimum Improvements and the City Council of the City shan have given conceptual
approval to the Redeveloper's submitted plans. At the same time the Redeveloper shall
submit to the City's building inspections department documents sufficient to allow a
detennination of feasibility of compliance with the State Building Code. Attached to this
Agreement as Schedule E is a list of documents required to be submitted to the City's
. building inspections department to enable such a review.
(h) Within thirty (30) days after the date of this Agreement, the Redeveloper
shall submit to the Authority organizational documents, acceptable to the Authority, for
the condominium association to be created in connection with the Minimum
Improvements.
Section 3.3. Acquisition of Acquisition Property.
(a) The Acquisition Property is owned by a third party. The Redeveloper is
negotiating with the owner of the Acquisition Property concerning its purchase of such
property. The Redeveloper agrees to continue such negotiations in good faith and to
periodically inform the Authority of the status of the negotiations. In the event that the
Redeveloper is unable to enter into a purchase agreement to acquire the Acquisition
Property for a reasonable price, considering the appraised fair market value and the
Redeveloper has performed all of its activities required by Section 3.2 of this Agreement,
10
the Redeveloper will infonn the Authority that it has been unable to acquire the
Acquisition Property for a reasonable price, considering the appraised fair market value
and request the Authority to acquire the Acquisition Property by eminent domain. If the
Redeveloper has performed all of its activities required to be perfonned under Section 3.2
of this Agreement and if the conditions precedent set forth in section 3.4 have been
satisfied the Authority will within a reasonable time following receipt of such request
from the Redeveloper hold a public hearing on the question of whether the Authority
should institute a proceeding to acquire the Acquisition Property using its powers of
eminent domain as provided in this section. The Redeveloper's notification to the
Authority of its inability to enter into a purchase areement to acquire the Acquisition
Propeliy for a reasonable price, considering the appraised fair market value, shall be
accompanied by such documentation as the Authority may require detailing the
Redeveloper's efforts to acquire the Acquisition Property for a reasonable price,
considering the appraised fair market value.
(b) Within a reasonable time after the Redeveloper notifies the Authority that
it has been unable to acquire the Acquisition Property and after such public hearing and
adoption by the Board of Commissioner of the Authority of a resolution authorizing and
directing the use of eminent domain proceedings to acquire the Acquisition Property, the
Authority will prepare and serve on the owner of the Acquisition Property and other
necessaty parties a petition to acquire the Acquisition Property through use of eminent
domain and the quick take procedure of Minnesota Statutes, section 117.042. The
Authority will diligently prosecute the eminent domain action to completion. The
Authority believes that it has the legal authority to acquire the Acquisition Property but
makes no warranties or guaranties to the Redeveloper that it will be able to do so. The
Redeveloper acknowledges that the Authority does not walTant the successful conclusion
of any eminent domain action or vacation procedures or the accomplishment of any
particular result or timetable because of the many variables inherent in any litigation or
legal proceeding. The Authority shall not be liable to any party for any consequential or
other damages that may mise out of any delays due to eminent domain actions, vacation
procedures, enviromnental conditions, court challenges or elements outside the control of
the Authority.. Once the eminent domain action has been initiated, the Authority agrees
to diligently pursue the same to completion. The Authority agrees to use its best efforts
to obtain the Acquisition Property for its mm'ket value in accordance with Minnesota law.
The Authodty agrees that it will not settle the eminent domain action without obtaining
the prior written approval of the Redeveloper, which written approval will not be
unreasonably withheld or delayed.
(c) Pdor to commencement of the eminent domain action the Authority will
obtain and furnish to the Redeveloper a commitrllent for the issuance of an owner's policy
of title insurance for the Acquisition Property naming the Authority as the proposed
insured party in the amount of the Authority's required deposit under Minnesota Statutes,
Section 117.042. The Redeveloper shall be allowed to review such commitment and to
provide the Authority with a list of written objections to such title. The Redeveloper's
objections shall be made in writing within twenty (20) days of its receipt of the title
commitment or shall be deemed waived. Upon receipt of the Redeveloper's list of written
II
objections, the Authority shall proceed in good faith and with all due diligence to attempt
to cause the objections made by the Redeveloper to be cured tlu'ough the exercise of its
powers of eminent domain.
(d) All costs incurred by the Authority in attempting to acquire the Acquisition
Property shall be paid by the Redeveloper in accordance with this section and section 3.9
of this Agreement; provided, however, that prior to the Authority's COITUnencement of an
eminent domain action to acquire the Acquisition Property the Redeveloper shall deposit
with the Authority the sum of $75,000 to be applied by the Authority to its legal costs
associated with the action. If the Authority determines that such amount will be
insufficient to pay its legal costs, the Authority shall have the right to require the
Redeveloper to deposit additional amounts with the Authority to pay such costs. (The
amount of the deposit is still subject to discussion.)
( e) In order to acquire title to the Acquisition Property pursuant to Minnesota
Statutes, section 117.042, the Authority must deposit with the court an amount equal to
its appraised value of the property. The Authority's obligation to initiate an eminent
domain action to acquire the Acquisition Property is subject to the condition precedent
that the Redeveloper and the Authority shall have entered into the Escrow Agreement,
pursuant to which the Redeveloper will have provided the escrow deposits, security,
collateral and third party guaranties as specified therein. The security deposited pursuant
to the Escrow Agreement may be used by the Authority to make the deposit with the
court required by Minnesota Statutes, section 117.042, and to pay any damages in excess
of the Authority's appraised value of the Acquisition Property that are finally determined
to be owed to the Acquisition Property's owner and any other obligations of the
Redeveloper to the Authority under this Agreement. To the extent that the final award of
damages for the taking of the Acquisition Property exceeds the amount deposited, the
Redeveloper shall be liable to the Authority for the amount of such excess.
(f) The Redeveloper's development of the Minimum Improvements will
result in the displacement of a number of owners and occupants of the Redevelopment
Property. The Redeveloper has caused to be prepared a relocation plan detailing the
relocation payments expected to be made to persons displaced from the Redevelopment
Property as a result of the development. Therefore, prior to the Authority's initiation of a
proceeding to acquire the Acquisition Property through the use of its powers of eminent
domain, the Redeveloper will do all of the following:
(i) Pursuant to the Escrow Agreement, the Redeveloper shall deposit
security acceptable to the Authority, by which the Redeveloper
irrevocably commits the sum of $1,250,000, which is the estimate
of the relocation costs contained in the "Block 64 Redevelopment
Relocation Plan" dated April 4, 2005 prepared by Wilson
Development Services, to be applied to relocation benefits for
persons and businesses displaced from the Redevelopment
Property. Such amount may be deposited either as cash, an
irrevocable bank letter of credit, or a combination thereof, in a
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form reasonably acceptable tQ the Authority. The Authority shall
use the amount so deposited to pay such relocation benefits. The
Authority shall be entitled to draw upon such amounts to pay any
relocation claims made by displaced persons or businesses against
the Authority. In addition, within ten (10) days following the
written request by the Authority, the Redeveloper shall advance
such additional amounts as may be necessary to enable the
Authority to pay all amounts as are determined by the Authority or
a court of competent jurisdiction to be due to persons displaced
from the Redevelopment Property as provided in applicable
relocation regulations.
(ii) The Redeveloper and the Authority shall enter into a contract with
a relocation consultant (the "Relocation Contract") to provide
relocation services relative to the relocation of all persons and
entities displaced as a result of the development of the Minimum
Improvements. The Authority agrees that Wilson Development
Services, Inc., is an acceptable relocation consultant for this
purpose. Although it will be a party to such Relocation Contract,
the Authority shall have no obligation to pay any amount owed
under such contract
(iii) The Relocation Contract shall provide that the relocation
consultant shall complete the relocation of all persons and entities,
including for persons or entities occupying the Acquisition
Property, who will be displaced as a result of the Redeveloper's
construction of the Minimum Improvements and shall provide to
the Authority a certification, in a fonn acceptable to the Authority,
from the Redeveloper's relocation consultant to the effect that such
persons and entities have been relocated in accordance with State
law and the federal Unifonn Relocation Act.
(g) Prior to the Authority's commencement of an action to acquire the
Acquisition Property the Redeveloper shall deposit with the Authority or enter into an
arrangement acceptable to the Authority by which the Redeveloper irrevocably commits
a sum of money equal to the estimated cost of completing the environmental remediation
of the Acquisition Property as detailed in the Redeveloper's environmental remediation
plan prepared pursuant to sections 3.2(c) and 3.3 of this Agreement.
Section 3.4. Conditions Precedent to Authority's Initiation of Eminent Domain Action.
The Authority's obligation to initiate a proceeding to acquire the Acquisition Property through
the use of its powers of eminent domain shall be subject to satisfaction, or waiver in writing by
the Authority, of all of the following conditions precedent:
(a) The Redeveloper not being in default under the terms of this Agreement;
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(b) The Authority having detennined, in its sole discretion and based on
documentation acceptable to the Authority, that the Redeveloper has used its best efforts
to acquire the Acquisition Property for a reasonable price, considering its appraised fair
market value, and has been unable to do so;
( c) The Redeveloper having completed to the satisfaction of the Authority all
of the activities detailed in section 3.2 of this Agreement;
(d) The Redeveloper having provided a firm commitment for financing,
acceptable to the Authority, sufficient to pay all costs of acquiring the Redevelopment
Property and constructing Phase I of the Minimum Improvements and all related costs
and shall have provided to the Authority a preliminary commitment for financing,
acceptable to the Authority in its sole discretion, for the construction of Phases II and III;
( e) The Authority and its consultants having undertaken a final feasibility
analysis of the Redeveloper's proposed development and detennined, to the Authority's
satisfaction, that the development is financially feasible, which analysis will be for the
benefit of the Authority only and neither the Redeveloper nor any third party shall be
entitled to rely thereon;
(f) The Redeveloper having executed and made the deposits required by the
Escrow Agreement and having completed all activities required to be completed by
Section 3.3 before the initiation of such eminent domain action;
(g) The Authority having held a public hearing on the conveyance of the
Acquisition Property to the Redeveloper as required by Minnesota Statutes, section
469.029, following which the Authority has determined to convey the Acquisition
Property to the Redeveloper;
(h) The Authority having held the public hearings described in Sections 3.3
and 3.Il of this Agreement; and
(i) The Authority having adopted a resolution authorizing and directing the
commencement of proceedings to acquire the Acquisition Property.
If all of the above conditions have not been satisfied or waived within one hundred and
eighty (I80) days after the date hereof, either party to this Agreement may terminate this
Agreement by giving written notice of tennination to the other party, upon which this Agreement
shall terminate, subject to section 10.9.
Section 3.5. Convevance ofProoertv.
(a) If the Authority acquires the Acquisition Property, the Authority will
convey such property to the Developer, subject to the tenns and conditions of this
Agreement.
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(b) In consideration of the Redeveloper's payment of the costs of acquiring
the Acquisition Property, no additional payment will be required of the Redeveloper to
acquire the Acquisition Property.
(c) The Authority shall convey title to and possession of the Acquisition
Property to the Redeveloper under a standard quit claim deed (the "Deed") containing the
reversionary clause described in Section 9.3 of this Agreement. The conveyance of the
Acquisition Property and the Redeveloper's use of the Acquisition Property and the
Redevelopment Property shall be subject to all of the conditions, covenants, restrictions
and limitations imposed by this Agreement and the Deed. The conveyance of title to the
Acquisition Property and the Redeveloper's use of the Acquisition Propeliy and
Redevelopment Property shall also be subject to Pennitted Encumbrances and building
and zoning laws and ordinances and all other local, state and federal laws and regulations.
(d) The Authority's obligation to convey the Acquisition Property, or any
portion thereof, to the Redeveloper shall be subject to satisfaction of all of the following
conditions precedent:
(i) the Redeveloper shall not be in default under any term of this Agreement or
the Escrow Agreement;
(ii) the Redeveloper shall have approved or waived any objections to title to the
Property in accordance with Section 3.3( c) hereof;
(iii) the Redeveloper shall simultaneously close on its financing for the
construction of the Phase of the Minimum Improvements to be constructed
011 the parcel to be conveyed; and
(iv) the Redeveloper shall have submitted and the Authority and City shall have
approved all building plans for the Minimum Improvements and the
Redeveloper shall have obtained any other governmental approvals
necessary to allow the construction and operation of the Improvements.
(e) In the event that all of the above conditions have not been satisfied, or
waived in writing by the Authority, or the Acquisition Property has not been conveyed to
the Redeveloper within one year from the date hereof, either the Authority or the
Redeveloper may teJ.minate this Agreement by giving written notice of termination to the
other party. In the event of such termination, the Authority and the Redeveloper shall
have no further obligations to the other under this Agreement, except that the parties shall
execute a cancellation agreement in recordable form terminating this Agreement and the
obligations under Section 10.9 shall survive such temunation. Notwithstanding the
foregoing, if the Authority has cornmenced eminent domain proceedings to acquire any
portion of the Acquisition Property, the Escrow Agreement shall remain in effect even if
this Agreement is tenninated.
15
(f) The Authority shall execute and deliver to the Redeveloper the Deed on the
later of: (i) seven (7) days after all of the conditiol1s contained in subsection 3.5( d) have
been satisfied; or (ii) on such other date as the Authority and the Redeveloper shall agree
in writing.
(g) The Deed shall be promptly recorded by or on behalf of the Redeveloper.
The Redeveloper shall pay all recording costs, including State deed tax, and all other
closing costs related to the Authority's conveyance of the Acquisition Property.
Section 3.6. Public Redevelopment Costs.
(a) The Authority agrees that it will reimburse the Redeveloper for the payment of
certain costs in connection with the acquisition and redevelopment of the Redevelopment
Property (the "Public Redevelopment Costs"). The Public Redevelopment Costs are
described on the attached Schedule C. The Authority agrees that it will reimburse the
Public Redevelopment Costs, using Available Tax Increment on a pay-as-you-go basis,
through the issuance and payment of the Notes as provided in this Agreement.
(b) The Redeveloper shall be solely responsible for all aspects of constructing
the Minimum Improvements. The Authority's reimbursement of the Redeveloper for the
Public Redevelopment Costs shall be accomplished through the Authority's issuance and
delivery of the Notes to the Redeveloper. It is anticipated that the Authority will issue a
Note for each Phase of the Minimum Improvements to reimburse the Redeveloper for the
Public Redevelopment Costs associated with the Phase. The Note for each Phase will be
issued upon completion of construction of the Phase and upon receipt by the Authority of
documentation showing that the Redeveloper has incurred Public Redevelopment Costs
associated with that Phase equal to or exceeding the principal amount of the Note. The
principal amounts of the Notes have been determined, based on fmancial infomlation
submitted to the Authority by the Redeveloper, as the amounts necessary to make the
development of the Minimum Improvements financially feasible. Based on such
financial information, the parties have agreed that the principal amount of the Note for
Phase I will be $ , the principal amount of the Note for Phase II will be
$ , and the principal amount of the Note for Phase III will be $
In no event will the aggregate principal amount of all of the Notes exceed $
(Sid, can you confirm the note amounts?)
Section 3.7. Issuance of Notes.
(a) The Authority's reimbursement of the Redeveloper for the Public Redevelopment
Costs shall be through the issuance of the Notes which shall occur at the times stated in Section
3.6 of this Agreement. The Notes shall be substantially in the form of the Note attached to this
Agreement as Schedule B, with all blanks properly filled in. The Notes shall be dated as of the
date of their issuance and shall be payable together with simple non-compounding interest at the
rate of six and three quarters percent (6.75%) per year from the date of the issuance of the Notes
until the Notes are paid in full or terminated. The principal amounts of the Notes shall be subject
to reduction as provided in section 3.10 of this Agreement. At the option of the Authority, in lieu
16
of issuing a series of Notes, the Authority may require that the Redeveloper at the time of
issuance of any Note after the initial Note surrender the previously issued Notes in return for the
Authority's issuance of a replacement Note. Such replacement Note will combine the
outstanding principal amounts of all previously issued Notes with the principal amount of the
new Note. If requested by the Redeveloper the Authority will issue a Note or Notes with priority
of payment over other Notes issued.
(b) The Redeveloper makes the following representations to the Authority with
respect to the issuance of the Notes to the Redeveloper:
(i) The Redeveloper has not relied on any representations of the Authority, or
any of its officers, agents, or employees, and has not relied on any opinion
of any attorney of the Authority, as to the Federal or State income tax
consequences relating to the purchase and ownership of the Notes by the
Redeveloper.
(ii) The Redeveloper is sufficiently knowledgeable and experienced in
financial and business matters, including the purchase and ownership of
obligations of a nature similar to the Notes, to be able to evaluate the risks
and merits of the purchase and ownership of the Notes. The Redeveloper
has been made aware of the security for the Notes and the proposed uses
of the proceeds of the Notes, and has received the cooperation of the
Authority in undertaking any due diligence that the Redeveloper has
deemed necessary or appropdate.
(iii) The Redeveloper understands that the Available Tax Increment is the sole
source of money that is pledged and will be available for the payments due
under the Notes; that the Authority is not under any obligation to
repurchase the Notes from the Redeveloper under any circumstances; that
the Notes are not general obligations of the Authority or the City; and
that, if the Available Tax Increment is not sufficient to make the payments
due under the Notes in full, no right will exist to have taxes levied by the
Authority or City for the payment of the unpaid amounts due under the
Notes.
(iv) The Redeveloper understands that the Available Tax Increment necessary
to pay the Notes has been estimated assuming that the market value of
Phase I will be at least $22,316,275 as of January 2, 2008, that the market
value of Phase II will be at least $23,843,262 as of January 2, 2009, and
that the market value of Phase III will be at least $23,159,650 as of
January 2, 2010. In the event, among other things, that the Redeveloper
fails to complete the Minimum Improvements in a timely manner the
Available Tax Increment may be inadequate to pay total principal of and
interest on the Notes. (Sid, can you confirm these values?)
17
(v) The Redeveloper understands that the Notes are not registered or
otherwise qualified for sale or transfer under the securities laws and
regulations of the State or under the Federal securities laws or regulations,
the Notes are not listed on any stock or other securities exchange, and the
Notes will carry no rating from any rating service.
(c) The Redeveloper shall not be entitled to sell, transfer or assign the Notes to a
Person, other than an affiliate of the Redeveloper, without the Authority's prior written consent.
The Authority understands, however, that the Redeveloper intends to pledge and assign the Note
to its lender of financing for construction of the Minimum Improvements and will pemlit such
pledge and assignment if the Redeveloper's lender executes and delivers to the Authority a
certification in a form acceptable to the Authority containing the representations concerning the
limited nature of the source of payment of the Notes set forth in subsection (b) above and such
other representations as the Authority may reasonably require.
(d) The Authority agrees that after completion of each Phase, after the Authority
undertakes the financial analysis of the Phase required by Section 3.10 of this Agreement, and
upon request by the Redeveloper the Authority will refinance the Note issued for the Phase by
issuing a Refunding Note for the Phase. The Refunding Note will be placed with investors
through an underwriter acceptable to the Authority and will be issued on tenns and conditions
then available in the public marketplace. Subject to reduction as provided in Section 3.10, the
Authority agrees that it will issue a Refunding Note in a principal amount that will generate Net
Refunding Note Proceeds of $ for Phase I, a Refunding Note in a principal amount
that will generate Net Refunding Note Proceeds of $ for Phase II and a Refunding
Note in a principal amount that will generate Net Refunding Note Proceeds of $ for
Phase III. The sole source of payment for the Refunding Notes shall in all cases be limited to
Available Tax Increment. If it is not possible to sell in the public marketplace the Refunding
Notes in a principal amount that will generate Net Refunding Note Proceeds in the amounts
specified above for any Phase, the difference between the Net Refunding Note Proceeds and
such specified amounts, , or such lesser amount as is detemlined pursuant to Section 3.10, will be
paid to the Redeveloper through the Authority's issuance and payment of the Excess Costs Notes
pursuant to subsection (e) of this Section.
( e) The Authority and the Redeveloper anticipate that it is likely that, due to the
limitations on the source of payment of the Refunding Notes and for other reasons, it will not be
possible to issue the Refunding Notes in principal amounts that will generate Net Refunding
Note Proceeds in the amounts set forth in subsection (d) above, or such lesser amounts as may be
allowed under Section 3.10. In such case the Authority agrees that it will issue an Excess Costs
Note to the Redeveloper. The principal amount of the Excess Costs Note for each Phase shall
equal the amount by which the Net Refunding Note Proceeds is less than the amount specified in
subsection (d) for such Phase, or such lesser amount as may be allowed under Section 3.10.
The Excess Costs Notes shall be in a form agreed upon by the Authority and the Redeveloper.
Each Excess Costs Note shall accrue simple non-compounding interest on the principal amount
from the date of issuance of the Excess Costs Note until the entire principal amount and all
accrued interest is paid at the same rate of interest as is payable on the principal amount of the
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Refunding Note. Interest shall be computed on the basis of a 360-day year of twelve (12) 30-day
months. The Excess Costs Notes shall be payable solely from Available Tax Increment
remaining after deducting the amounts necessary to pay debt service on any outstanding
Refunding Notes.
(f) Ifrequested by the Redeveloper, the Authority will explore whether the Note, the
Refunding Notes, or the Excess Costs Notes can be issued on a tax exempt basis. Whether or not
to issue such notes on a tax exempt basis shall be in the sole discretion of the Authority and will
be affected by such considerations as whether such tax exempt obligations can legally be issued
and the impact on the City's and Authority's ability to issue other tax exempt obligations
qualified under Section 265(b )(3)(B) of the United States Internal Revenue Code of 1996, as
amended.
Section 3.8. Conditions Precedent to the Issuance of the Note. Refunding Note and Excess
Costs Note. (a) The Authority's obligation to issue the Note to the Redeveloper shall be subject
to the satisfaction, or waiver by the Authority in writing, of all of the following conditions
precedent:
(i) the Redeveloper shall not be in default under any term of this Agreement or the
Escrow Agreement;
(ii) the Redeveloper shall have completed construction of the Phase for which the
Note is being issued, as evidenced by the City's issuance of a certificate of
occupancy; and
(iii) the Redeveloper shall have furnished the Authority with invoices and
documentation, in a fonn acceptable to the Authority, demonstrating that the
Public Redevelopment Costs for which the Note is being issued have been paid.
(b) The Authority's obligation to issue the Refunding Note and the Excess Costs Note
shall be subject to the satisfaction, or waiver by the Authority in writing, of the following
conditions precedent:
(i) the Redeveloper shall not be in default under any term of this Agreement or the
Escrow Agreement; and
(ii) the Authority shall have conducted the financial analysis as described in Section
3.10 and detenllined the final principal amount of the Refunding Note.
Section 3.9. Payment of Authority's Costs. The Redeveloper has paid and shall continue
to pay all of the Authority's out-of-pocket costs incurred with third party vendors and consultants
in connection with the implementation of the Redeveloper's proposed development. Such costs
shall include, but not be limited to, all out -of-pocket costs, whether incurred prior to or after the
date of this Agreement, incurred by the Authority or City with respect to the proposed
development, including, without limitation, all fees owed to the Authority's or City's traffic,
development, fiscal, environmental, communications and other consultants, and all attorneys'
19
fees or other costs incurred by the Authority or City in connection with the negotiation and
preparation of this Agreement, the creation of the Tax Increment District, defending any legal
actions brought against the Authority or City challenging the legality of any of their actions
taken relative to this Agreement or the Redeveloper's development of the Minimum
Improvements, and the acquisition of the Acquisition Property, and all related documents or
transactions, or in enforcing the Redeveloper's obligations to pay costs which it is obligated to
pay under this Agreement. The Redeveloper has paid all costs incurred by and billed to the
Authority as of the date of this Agreement and at the time of execution of this Agreement has
deposited $25,000 with the Authority. The Authority shall have the right to draw upon amounts
on deposit with it to pay its costs. Legal fees associated with the prosecution of any eminent
domain action or any other litigation related to the Tax Increment District, the Project or this
Agreement shall not be payable from the amounts required to be deposited under this Section but
shall be payable from the deposits required under Section 3.3(d) or Section 6.3. The Redeveloper
agrees to maintain a deposit with the Authority in the amount of $10,000. If the amount on
deposit becomes depleted below $10,000, the Authority shall have the right to request that the
Redeveloper replenish such funds upon which the Redeveloper shall, within 15 days of request
by the Authority, remit to the Authority additional funds to reimburse the Authority for such
costs as have been incurred by it and for which Redeveloper has not yet reimbm'sed the
Authority and to be held on deposit so that the amount on deposit will equal $10,000. If on
termination of this Agreement, the amounts held by the Authority are insufficient to pay the
Authority's costs, the Redeveloper shall be liable for any deficiency. If this Agreement is
temlinated in accordance with the tenns hereof, any sums remaining on deposit with the
Authority, after the Authority pays or reimburses itself for costs incurred to the date of
termination, shall be returned to the Redeveloper. The Redeveloper's obligations to pay the
Authority's and City's costs under this section shall continue until the date that the Redeveloper
has received a certificate of occupancy for the entire Minimum Improvements and shall include
all costs incurred up to the date of such receipt; provided, however, that to the extent that after
such date the Authority continues to incm' costs relating to eminent domain proceedings to
acquire the Acquisition Property or in defending any action challenging the validity of the Tax
Increment District, the Project or this Agreement the Redeveloper's obligation to payor
reimburse the Authority for such costs shall not terminate until termination of such proceedings
or court cases.
Section 3.10. Adiustment of Note Amounts. TIle Authority's detennination to reimburse
the Redeveloper for a portion of the Public Redevelopment Costs is based in part on the
Authority's analysis of the Redeveloper's total costs to be incurred in connection with the
redevelopment of the Redevelopment Property. The amount of the Public Redevelopment
Costs to be reimbursed by the Authority was detennined based on a preliminary sources and uses
statement dated July 11, 2005, an abbreviated version of which is attached to this Agreement as
Schedule D. A more detailed version of the preliminary sources and uses statement is on file
with the Authority's financial advisor and will be maintained confidential to the extent legally
possible. As the Redeveloper further refines its plans for the Minimum Improvements the
preliminary sources and uses statement may change and, as a result, the amount of the Public
Redevelopment Costs to be reimbursed may decrease. The preliminary sources and uses
statement projects the percentage of the total costs incurred by the Redeveloper in developing,
acquiring, marketing, holding, managing, operating, and selling the residential portion of the
20
Minimum Improvements, which costs will include the categories of costs showing on Schedule
D, that the Redeveloper will derive as a profit. No later than one year after the sale by the
Redeveloper of the last residential unit in each Phase of the Minimum Improvements or the
completion of all eminent domain proceedings initiated to acquire the Acquisition Property,
whichever occurs later, the Redeveloper will provide to the Authority a final sources and uses
statement showing all costs incurred in developing the residential portion of the Phase and all
revenues derived from the sale of the residential units. The final sources and uses statement shall
be accompanied by a letter from an independent certified public accountant certifYing that such
accountant, without a full audit of Redeveloper's books, has reviewed the statement and that the
statement accurately represents the costs and revenues incurred and derived by the Redeveloper
in cormection with the development of the residential units in the Phase The Redeveloper shall
provide such other documentation as the Authority may request supporting the sources and uses
statement. The Redeveloper shall be allowed to derive a profit from the development of the
residential units of each phase of 12% of the costs of such development, plus an additional 2% of
such costs in consideration for the Redeveloper's provision of the guaranties and other security
required by this Agreement prior to the commencement of any eminent domain proceedings to
acquire the Acquisition Property and an additional 2% in consideration for the Redeveloper's
assumption of the risk that property values in the Tax Increment District will increase to levels
that will allow the Excess Costs Notes to be paid in full. If the Authority determines that the
profit to be derived by the Redeveloper for any Phase will exceed such allowable amounts of
profit, the principal amounts of the Note, Refunding Note or Excess Costs Note for that Phase
will be reduced by the amount of the excess profit. To the extent that the profit derived by the
Redeveloper fi'om a Phase is less than the amount of profit allowed by this section, such
deficiency in profit shall be allowed as a credit against the profit derived from another Phase or
Phases that exceeds the profit allowed by this section.
Section 3.11. Business Subsidv Agreement. Within sixty (60) days after the date hereof
the Authority will hold a public hearing on the granting of a business subsidy to the Redeveloper
as required pursuant to Minnesota Statutes, section Il6J.994, subd. 5. Following such public
hearing the Authority may determine that wage and job goals are not among the goals the
Authority is seeking to achieve. In that event the Authority and the Redeveloper shall enter into
a Business Subsidy Agreement to satisfY the other requirements of the Minnesota Business
Subsidy Law. If the Authority detennines that wage and job goals should be met by the
Redeveloper and the Redeveloper agrees to such goals, this Agreement will be amended to
reflect such goals. If the Developer does not agree to meet such goals, this Agreement shall
tenninate and the parties shall execute an instrument in recordable fonn evidencing such
termination. The obligations of Section 3.9 shall survive such termination.
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ARTICLE IV
Construction of Minimum Improvements
Section 4.1. Construction and Operation of Minimum Improvements. The Redeveloper
agrees that it will construct the Minimum Improvements on the Redevelopment Property in
accordance with the approved Construction Plans, together with any changes approved by the
Authority and any changes not requiring the Authority's approval, and at all times prior to the
Maturity Date will operate and maintain, preserve and keep the Minimum Improvements or
cause the Minimtnn Improvements to be maintained, preserved and kept with the appurtenances
and every part and parcel thereof, in good repair and condition.
Section 4.2. Construction Plans: Planning Approvals.
(a) The Authority's willingness to assist the Redeveloper in its redevelopment
of the Redevelopment Property is predicated upon and subject to the Redeveloper's
agreement that it will construct the Minimtnn Improvements in accordance with the
schedule described in Section 4.3 and that the Minimum Improvements will be of such
quality and nature as will satisfY the Authority's and City's goals for the redevelopment
of the Redevelopment Property. Within sixty (60) days after the date the City notifies the
Redeveloper that it is able to undertake a fonnal review of the Redeveloper's
development proposal, the Redeveloper shall submit to the City completed applications
for approval of Redeveloper's site plan, rezoning, preliminary/final plat, and any other
actions detennined to be necessary or desirable to permit the development of the
Minimtnn Improvements. Such documents shall be consistent with the information
submitted to and approved by the City and Authority pursuant to the preliminary concept
review process described in Section 3.2(g). AIl of such applications and documentation
together with the resolution of the City Council of the City and related documents
granting such approvals are referred to herein as the "Construction Plans". The
Construction Plans shall be prepared consistent with the Design Standards. The parking
facilities to be constructed to serve the Minimunl Improvements shall confonn to the
recommendations contained in the memorandtnn from SRF Consulting Group, Inc., dated
March 27, 2005, as amended. AIl additional building plans shall be prepared consistent
with the Construction Plans, except as may be permitted by this section. Nothing in this
section shall be deemed to relieve the Redeveloper of its obligations to comply with the
requirements of the City's normal construction permitting process or to restrict the City
in the exercise of its discretion in granting any approval related to the Redeveloper's
development.
(b) If the Redeveloper desires to make any change in any Construction Plans
after their approval by the Authority, the Redeveloper shall submit the proposed change
to the Authority for its approval. If the Construction Plans, as modified by the proposed
change, are acceptable to the Authority, the Authority shall approve the proposed change
and notifY the Redeveloper in writing of its approval. The Authority shall not
unreasonably withhold or delay approval of any requested change in the Construction
Plans and any requested change in the Construction Plans shall, in any event, be deemed
22
approved by the Authority unless rejected, in whole or in part, by written notice by the
Authority to the Redeveloper, setting forth in detail the reasons therefor. Such rejection
shall be made within sixty (60) days, or such longer period as may be agreed to by the
parties, after receipt of the notice of such change or shall be deemed to be approved. The
Authority shall have no obligation to approve a change that materially alters the nature,
quality, construction schedule or value of the Minimum Improvements or that deviates
from the site plan or elevations submitted to and approved by the Authority. Nor shall
the Authority have an obligation to approve any change that requires approval by the City
Council.
(c) Nothing in this Agreement shall be deemed to modify the City's normal
construction permitting process as it applies to the Redeveloper's plans for development
and the Redeveloper shall in all respects be required to comply with such process.
(d) During the process of constructing the Minimum Improvements the
Redeveloper will allow a tester to enter into the various buildings comprising the
Minimum Improvements to test the strength of the City's police department's digital
radio system. If it is determined to be necessary to boost the radio signals, the
Redeveloper will install signal anlplifiers in the buildings as required by the City.
Section 4.3. Conunencement and Completion of Construction. Subject to Unavoidable
Delays, the Redeveloper shall commence construction of Phase I within thirty (30) days after the
Redeveloper acquires title to all of the property on which Phase I will be built, and shall
complete such construction within fourteen (14) months after commencement; provided, that if
the conveyance of any portion of the Redevelopment Property for Phase I occurs at a time that
would necessitate a winter construction start to meet the commencement requirement,
commencement of construction of Phase I may be extended to April 1 of the following year.
Subject to Unavoidable Delays, the Redeveloper shall commence construction of Phase II by
April 1,2007, and shall complete such construction by June 30,2008. Subject to Unavoidable
Delays, the Redeveloper shall commence construction of Phase III by April I, 2008, and shall
complete such construction by June 30, 2009.
All work with respect to the Minimum Improvements and other improvements to be
constructed or provided by the Redeveloper on the Redevelopment Property shall be in
conformity with the Construction Plans, together with any changes approved by the Authority
and any changes not requiring the Authority's approval, as submitted by the Redeveloper and
approved by the Authority.
The Redeveloper agrees for itself, its successors and assigns, and every successor in
interest to the Redevelopment Property, or any part thereof, that the Redeveloper, and its
successors and assigns, shall promptly begin and diligently prosecute to completion the
redevelopment of the Redevelopment Property through the construction of the Minimum
Improvements thereon, and that such construction shall in any event be commenced and
completed within the periods specified in this Section 4.3 of this Agreement and subject to
Unavoidable Delays and/or mumal agreement of the parnes hereto. Until construction of the
Minimum Improvements has been completed, the Redeveloper shall make construction progress
23
reports, at such times as may reasonably be requested by the Authority, but not more than once a
month, as to the actual progress of the Redeveloper with respect to such construction. Upon
substantial completion of the Minimum Improvements and upon request by the Redeveloper, the
Authority shall provide to the Redeveloper a certificate in recordable form stating that the
obligations of the Redeveloper with respect to the construction of the Minimum Improvements
under this Agreement have been satisfied. The Minimum Improvements shall be deemed to be
completed when a certificate of occupancy has been issued by the City and the Redeveloper has
provided security or other assurances reasonably satisfactory to the Authority assuring that any
remaining items, including without limitation, landscaping, will be completed.
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ARTICLE V
Insurance
Section 5.1. Insurance.
(a) The Redeveloper or its contractors will provide and maintain at all times
during the process of constructing the Minimum Improvements and, from time to time at
the request of the Authority, furnish the Authority with proof of payment of premiums
on:
(i) Builder's risk insurance, written on the so-called "Builder's Risk -
Completed Value Basis," in an amount equal to one hundred percent (100%) of
the insurable value of the Minimum Improvements at the date of completion, and
with coverage available in nonreporting fonn on the so called "all risk" form of
policy;
(ii) Comprehensive general liability insurance (including operations,
contingent liability, operations of subcontractors, completed operations,
Broadening Endorsement including contractual liability insurance) together with
an Owner's Contractor's Policy with limits against bodily injury and property
damage of not less than $2,000,000.00 for each occurrence (to accomplish the
above-required limits, an umbrella excess liability policy may be used); and
(iii) Worker's compensation insurance, with statutory coverage and
employer's liability protection.
The policies of insurance required pursuant to clauses (i) and (ii) above shall be in form
and content reasonably satisfactory to the Authority and shall be placed with financially
sound and reputable insurers licensed to transact business in the State, the liability insurer
to be rated A or better in Best's Insurance Guide; provided, that the Redeveloper shall
have the right to self-insure to satisfy said requirements with the written approval of the
Authority. The policy of insurance delivered pursuant to clause (i) above shall contain an
agreement of the insurer to give not less than thirty (30) days' advance written notice to
the Authority in the event of cancellation of such policy or change affecting the coverage
thereunder.
(b) Upon completion of construction of the Minimum Improvements and prior
to the Maturity Date, the Redeveloper shall maintain, or cause to be maintained, at its
cost and expense, and from time to time at the request of the Authority shall furnish proof
of the payment of premiums on, insurance as follows:
(i) Insurance against loss and/or damage to the Minimum
Improvements under a policy or policies covering such risks as are ordinarily
insured against by similar businesses, including (without limiting the generality of
the foregoing) fire, extended coverage, all risk vandalism and malicious mischief,
25
boiler explosion, water damage, demolition cost, debris removal, and collapse in
an amount not less than the full insurable replacement value of the Minimum
Improvements, but any such policy may have a deductible amount of not more
than $50,000.00. No policy of insurance shall be so written that the proceeds
thereof will produce less than the minimum coverage required by the preceding
sentence, by reason of co-insurance provisions or otherwise, without the prior
consent thereto in writing by the Authority. The tenn "full insurable replacement
value" shall mean the actual replacement cost of the Minimum Improvements
(excluding foundation and excavation costs and costs of underground flues, pipes, .
drains and other uninsurable items) and equipment, and shall be determined from
time to time at the request of the Authority, but not more frequently than once
every three years, by an insurance consultant or insurer, selected and paid for by
the Redeveloper and approved by the Authority.
(ii) Comprehensive general public liability insurance, including
personal injury liability (with employee exclusion deleted), and automobile
insurance, including owned, non-owned and hired automobiles, against liability
for injuries to persons and/or property, in the minimum amount for each
occurrence and for each year of $2,000,000.00.
(iii) Such other insurance, including worker's compensation insurance
respecting all employees of the Redeveloper, in such amount as is customarily
carried by like organizations engaged in like activities of comparable size and
liability exposure; provided that the Redeveloper may be self-insured with respect
to all or any part of its liability for worker's compensation.
(c) All insurance required in Article V of this Agreement shall be taken out
and maintained in responsible insurance companies selected by the Redeveloper which
are authorized under the laws of the State to assume the risks covered thereby.
(d) The Redeveloper agrees to notif'y the Authority immediately in the case of
damage exceeding $25,000 in amount to, or destruction of, the Minimum Improvements
or any portion thereof resulting from fire or other casualty. In the event of any such
damage, the Redeveloper will forthwith repair, reconstruct and restore the Minimum
Improvements to substantially the same or an improved condition or value as existed
prior to the event causing such damage and, to the extent necessary to accomplish such
repair, reconstruction and restoration, the Redeveloper will apply the Net Proceeds of any
insurance relating to such damage received by the Redeveloper to the payment or
reimbursement of the costs thereof.
The Redeveloper shall complete the repair, reconstruction and restoration of the
Minimum Improvements, whether or not the Net Proceeds of insurance received by the
Redeveloper for such purposes are sufficient to pay for the same. Any Net Proceeds
remaining after completion of such repairs, construction and restoration shall be remitted
to the Redeveloper.
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In the event of substantial or total destruction of the Minimum Improvements, the
Redeveloper may elect to not repair or reconstruct the Minimum Improvements, in which
case the Authority may, as its sole remedy, terminate its obligations under the Notes.
(e) The Authority agrees that its rights under this Section relative to the
application of Net Proceeds of insurance provided under Section 5. I (a)(i) and (b)(i) and
as provided in Section 5.l(d) shall be subordinate to the rights of a Holder of a Mortgage
approved by the Authority; provided, that the Authority's right to terminate the Note for a
violation of the Redeveloper's obligations under this Section shall not be subordinated to
the rights of a Holder.
(f) The provisions of this Article V shall tenninate with respect to any
residential unit of the Minimum Improvements at such time as that unit is sold to an
individual purchaser thereof.
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ARTICLE VI
Taxes; Tax Increment
Section 6.1. Real Property Taxes. The Redeveloper shall payor cause to be paid when
due and prior to the imposition of penalty all real property taxes and installments of special
assessments payable with respect to the Redevelopment Property. The provisions of this section
shall terminate with respect to any residential unit of the Minimum Improvements at such time as
that unit is sold to an individual purchaser thereof.
Section 6.2. Creation of Tax Increment District. The AUthOlity and the City have created
the Tax Increment District as a "redevelopment district" as defined in Minnesota Statutes,
section 469.174, subd. 10.
Section 6.3. Tax Increment.
(a) Subject to the limitations contained in the Notes, the AuthOlity pledges to the
payment of the Notes the Available Tax Increment. The Redeveloper acknowledges that
the Authority has made no warranties or representations to the Redeveloper as to the
amounts of Tax Increment that will be generated or that anlounts pledged pursuant to this
Section 6.3 will be sufficient to pay the Notes in whole or in part. Nor is the Authority
warranting that it will have throughout the term of this Agreement and the Notes the
continuing legal ability under State law to apply Tax Increment to the payment of the
Notes, which continued legal ability is a condition precedent to the Authority's
obligations under the Notes. Tax Increment received by the Authority that is in excess of
Available Tax Increment shall be the property of the Authority and the Authority shall be
free to use such excess Tax Increment for any purpose for which such Tax Increment
may used under the Tax Increment Act.
(b) The Authority believes that the Tax Increment District has been created in
accordance with State law and that, after modifying the Tax Increment Plan for the Tax
Increment District, it will have the legal authority to spend the Tax Increment in
accordance with this Agreement. However, it does not warrant the same to the
Redeveloper. The Redeveloper has caused to be undertaken on its behalf a review of all
actions taken by the City and the Authority in creating the Tax Increment District and in
approving this Agreement and has determined to its satisfaction that the Authority's
actions under this Agreement are authorized by law.
(c) The Redeveloper is aware of the objections raised by the owner of the
Acquisition Property to the City's and the Authority's creation of the Tax Increment
District. The Redeveloper shall be responsible for the payment of all costs incurred by
the Authority or City in responding to such objections and in defending any litigation
initiated challenging the creation of the Tax Increment District. If any such litigation or
any other litigation is commenced challenging the City's or Authority's ability to proceed
with the transactions contemplated by this Agreement, the Authority shall have the right
to require the Redeveloper to deposit with the Authority such additional amounts as are
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detennined by the City's and Authority's legal counsel to be used to pay the Authority's
and City's costs incurred. The deposit of such additional amounts is a condition
precedent to the Authority's obligations to proceed under this Agreement.
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ARTICLE VII
Financin2
Section 7.1. Financing. Within the deadlines provided herein, the Redeveloper shall
submit to the Authority evidence that the Redeveloper has financing sufficient for acquisition of
the Redevelopment Property, the construction of the Minimum Improvements and the
performance of the Redeveloper's obligations under this Agreement. Evidence of financing for
Phase I shall be provided at the times specified in Section 3.2 of this Agreement. With respect to
Phases II and III, no later than sixty (60) days before the date set forth in Section 4.3 for the
commencement of such Phase, the Redeveloper shall provide to the Authority a firm
commitment, acceptable to the Authority sufficient to pay all costs associated with the
development of such Phase. If the Authority finds that the financing is sufficiently committed,
adequate in amount to provide for the acquisition of the Redevelopment Property and
construction of the relevant Phase of the Minimum Improvements, and subject only to such
conditions as the Authority may approve then the Authority shall notify the Redeveloper in
writing of its approval. Such approval shall not be unreasonably withheld and either approval or
rejection shall be given within ten (10) days from the date when the Authority is provided the
evidence of financing, or the financing shall be deemed approved. If the Authority rejects the
evidence of financing as inadequate, it shall do so in writing specifying the basis for the
rejection. In any event the Redeveloper shall submit adequate evidence offmancing within sixty
(60) days after such rejection.
Section 7.2. Limitation Upon Encumbrance of Propertv. Prior to the completion of the
Minimum Improvements, as certified by the Authority, neither the Redeveloper nor any
successor in interest to the Redevelopment Property, or any part thereof, shall engage in any
financing or any other transaction creating any mortgage or other encumbrance or lien upon the
Redevelopment Property, whether by express agreement or operation of law, or suffer any
encumbrances or lien to be made on or attach to the Redevelopment Property, except: (a) for the
purposes of obtaining funds only to the extent necessary for constructing one or more Phases of
the Minimum Improvements (including, but not ,limited to, land and building acquisition,
demolition costs, including the purchase price paid, labor and materials, professional fees, real
estate taxes, construction interest, organizational and all other soft and indirect costs of
development, costs of constructing the Minimum Improvements, marketing and holding costs
and an allowance for contingencies); and (b) only updn the prior written approval of the
Authority, which approval shall not be unreasonably withheld or delayed. For the purposes of
such mortgage financing as may be made pursuant to the Agreement, the Redevelopment
Property may, at the option of the Redeveloper (or successor in interest), be divided into several
parts or parcels, provided that such subdivision, in the reasonable opinion of the Authority, is not
inconsistent with the purposes of this Agreement and is approved in writing by the Authority.
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ARTICLE VIII
Prohibitions Against Assignment and Transfer. Indemnification
Section 8.1. Prohibition Against Transfer of Property and Assignment of Agreement.
Except as noted below, the Redeveloper represents and agrees that prior to the Maturity Date, the
Redeveloper has not made or created, and will not make or create, or suffer to be made or
created, any total or paliial sale, assignment, conveyance, or lease, or any trust or power, or
transfer in any other mode or form of or with respect to this Agreement or the Redevelopment
Property or any part thereof or any interest herein or therein, or any contract or agreement to do
any of the same, without the prior written approval of the Authority, which approval shall not be
. unreasonably withheld or delayed. Provided, however, that the foregoing restriction will not
apply to anyone or more of the following:
(a) Granting a mortgage, security interest or other lien upon the
Redevelopment Property for purposes of obtaining financing as contemplated herein
including, without limitation, the financing anticipated under Section 7.2 above.
(b) A sale of residential units to individual purchasers.
( c) A sale or lease of all or any portion of the approximately 8,800 square feet
of commercial space to retail or commercial tenants or users in the ordinary course of
business after the completion of Phase I of the Minimwn Improvements.
In the absence of specific written agreement by the Authority to the contrary, no such
transfer or approval thereof by the Authority shall be deemed to relieve the Redeveloper, or any
other party bound in any way by this Agreement or otherwise with respect to the construction of
the Minimwn Improvements, from any of its obligations with respect thereto, nor shall
Redeveloper or any other party bound by this Agreement be released from any obligations
hereunder without the written release by the Authority.
Section 8.2. Release and Indemnification Covenants.
(a) The Redeveloper releases from and covenants and agrees that the
Authority and the governing body members, officers, agents, servants and employees
thereof shall not be liable for and agrees to indemnify and hold harmless the Authority
and the governing body members, officers, agents, servants and employees thereof
against any loss or damage to property or any injury to or death of any person occurring
at or about or resulting from any defect in the Minimwn Improvements, other than caused
by the willful misconduct or gross negligence of the Authority or its governing body
members, officers, agents, servants and employees.
(b) Except for any willful misrepresentation, any willful or wanton
misconduct, or any grossly negligent actions of the following named parties, the
Redeveloper agrees to protect and defend the Authority and the City and the governing
body members, officers, agents, servants and employees thereof, now or forever, and
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further agrees to hold the aforesaid hannless from any claim, demand, suit, action or
other proceeding whatsoever by any person or entity whatsoever arising or purportedly
arising from this Agreement, or the transactions contemplated hereby or the acquisition,
construction, installation, ownership, and operation of the Minimum Improvements. The
indemnification obligations of the Redeveloper pursuant to this subsection shall include,
but not be limited to, in any event, any pecuniary loss or penalty (including interest
thereon from the date that the loss is incurred or penalty paid by the Authority at the rate
of interest in the Notes) arising out of the Authority's creation of the Tax Increment
District or the issuance and payment of the Notes.
( c) The Authority and the governing body members, officers, agents, servants
and employees thereof shall not be liable for any damage or injury to the persons or
property of the Redeveloper or its officers, agents, servants or employees or any other
person who may be about the Redevelopment Property or Minimum Improvements due
to any act of negligence of any person other than the Authority or its governing body
members, officers, agents, servants and employees.
(d) All covenants, stipulations, promises, agreements and obligations of the
Authority contained herein shall be deemed to be the covenants, stipulations, promises,
agreements and obligations of the Authority and not of any governing body member,
officer, agent, servant or employee of the Authority in the individual capacity thereof.
Section 8.3. Indemnification for Relocation Claims. Without limiting any other
provision of this Agreement, the Redeveloper hereby agrees to protect and defend the Authority
and the City and the governing body members, officers, agents, servants and employees thereof,
now or forever, and further agrees to hold the aforesaid hannless from any claim, demand, suit,
action or other proceeding whatsoever by any person or entity whatsoever for relocation benefits
or assistance under State or federal law as a result of the Redeveloper's or the Authority's
activities under this Agreement.
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ARTICLE IX
Events of Default
Section 9.1. Events of Default Defined. The term "Event of Default" shall mean,
whenever it is used in this Agreement (unless the context otherwise provides), subject to
Unavoidable Delays, any failure by Redeveloper to substantially observe or perform any material
covenant, condition, obligation or agreement on its part to be observed or performed hereunder
or under the Escrow Agreement.
Section 9.2. Authoritv's Remedies on Default. Whenever any Event of Default by
Redeveloper referred to in Section 9.1 of this Agreement occurs, the Authority may immediately
suspend its perfonnance under the Agreement and the Note until it receives assurances from the
Redeveloper, deemed reasonably adequate by the Authority, that the Redeveloper will cure its
default and continue its perfonnance under the Agreement and may take anyone or more of the
following actions after providing thirty (30) days written notice to the Redeveloper of the Event
of Default, but only if the Event of Default has not been cured within said thirty (30) days or if
the Event of Default is by its nature incapable of being cured within said thirty (30) days and the
Redeveloper has not provided to the Authority evidence reasonably satisfactory to the Authority
that the Event of Default will be cured and will be cured as soon as reasonably possible:
(a) Terminate this Agreement and/or the Note.
(b) Exercise any remedies available to the Authority under the Deed.
(c) Take whatever action, including legal, equitable or administrative action,
which may appear necessary or desirable to the Authority to collect any payments due
under this Agreement, or to enforce perfonnance and observance of any obligation,
agreement, or covenant of the Redeveloper under this Agreement.
Section 9.3. Revesting of Title in Authoritv. If the Redeveloper fails to COlmnence or
complete construction of the Minimum Improvements within the period specified in Section 4.3
of this Agreement the Authority shall have the right to cancel the sale of the Redevelopment
Property to the Redeveloper, whereupon title to the Redevelopment Property shall revert to the
Authority. Upon revesting title to the Redevelopment Property in the Authority, the Authority
will use its best efforts to resell the Redevelopment Property for redevelopment and shall use the
proceeds of such a resale to first, reimburse itself for all of its costs incurred in enforcing its
rights under this Agreement, making any reimbursement to Redeveloper under this Agreement,
in clearing title to the Redevelopment Property and in reselling the Redevelopment Property, and
second, to reimburse the Redeveloper for the purchase price paid by the Redeveloper to acquire
the Redevelopment Property. The deed from the Authority to the Redeveloper shall convey title
to the Redevelopment PropeJ.iy subject to a right of reversion reserved to the Authority as
described in this Section.
Section 9.4. No Remedv Exclusive. No remedy herein conferred upon or reserved to the
Authority or Redeveloper is intended to be exclusive of any other available remedy or remedies,
33
but each and every such remedy shall be cumulative and shall be in addition to every other
remedy given under this Agreement or now or hereafter existing at law or in equity or by statute.
No delay or omission to exercise any right or power accruing upon any 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. In order to entitle
the Authority or the Redeveloper to exercise any remedy reserved to it, it shall not be necessary
to give notice, other than such notice as may be required in this Article IX.
Section 9.5. No Additional Waiver Implied bv One Waiver. In the event any agreement
contained in this Agreement should be breached by either party and thereafter waived by the
other party, such waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other concurrent, previous or subsequent breach hereunder.
Section 9.6. Costs of Enforcement. Whenever any Event of Default occurs and the
Authority shall employ attorneys or incur other expenses for the collection of payments due or to
become due or for the enforcement of performance or observance of any obligation or agreement
on the part of the Redeveloper under this Agreement and the Authority prevails in such action or
effort, the Redeveloper agrees that it shall, within thirty (30) days of written demand by the
Authority pay to the Authority the reasonable fees of such attorneys and such other expenses so
incurred by the Authority.
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1----.
I
ARTICLE X
Additional Provisions
Section 10.1. Representatives Not Individual1v Liable. No member, official, or employee
of the. Authority shall be personally liable to the Redeveloper, or any successor in interest, in the
event of any default or breach or for any amount which may become due to the Redeveloper or
successor on account of any obligations under the terms of the Agreement.
Section 10.2. Eaual Employment Opportunity. The Redeveloper, for itself and its
successors and assigns, agrees that during the construction of the Minimum Improvements
provided for in the Agreement it will comply with all applicable federal, state and local equal
employment and non-discrimination laws and regulations.
Section 10.3. Restrictions on Use. The Redeveloper agrees for itself, and its successors
and assigns, and every successor in interest to the Redevelopment Property, or any part thereof,
that the Redeveloper, and such successors and assigns, shall until the Maturity Date devote the
Redevelopment Property to, and only to and in accordance with, the uses specified in this
Agreement.
Section 1004. Titles of Articles and Sections. Any titles of the several parts, Articles, and
Sections of the Agreement are inserted for convenience of reference only and shall be
disregarded in construing or interpreting any of its provisions.
Section lOA. Notices and Demands. Except as otherwise expressly provided in this
Agreement, a notice, demand, or other corrununication under the Agreement by either party to
the other shall be sufficiently given or delivered if it is dispatched by registered or certified mail,
postage prepaid, return receipt requested, or delivered personally; and
(a) in the case of the Redeveloper, is addressed to or delivered personally to
the Redeveloper at 15 Sixth Avenue North, Hopkins, MN 55343, with copy to David
Kirkman, Ravich Meyer Kirkman, McGrath & Naun:ian, 4545 IDS Center, SO South Sth
Street, Minneapolis, MN 55402; and
(b) in the case of the Authority, is addressed to or delivered personally to the
Authority at 1010 First Street South, Hopkins, Minnesota 55343, with copy to Robert J.
Deike, Bradley & Deike, P.A., 4018 West 65th Street, Suite 100, Edina, MN 55436,or at
such other address with respect to either such party as that party may, from time to time,
designate in writing and forward to the other as provided in this Section.
Section 10.5. Disclaimer of Relationships. The Redeveloper acknowledges that nothing
contained in this Agreement nor any act by the Authority or the Redeveloper shall be deemed or
construed by the Redeveloper or by any third person to create any relationship of third-party
beneficiary, principal and agent, limited or general partner, or joint venture between the
Authority and the Redeveloper and/or any third party.
35
Section 10.6. Modifications. This Agreement may be modified solely through written
amendments hereto executed by the Redeveloper and the Authority.
Section 10.7. Counteroarts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the sanle instrument.
Section 10.8. Judicial Interpretation. Should any provision of this Agreement require
judicial interpretation, the court interpreting or construing the same shall not apply a presumption
that the tenus hereof shall be more strictly construed against one party by reason of the rule of
construction that a document is to be construed more strictly against the party who itself or
through its agent or attorney prepared the same, it being agreed tllat the agents and attorneys of
both parties have participated in the preparation hereof.
Section 10.9. Effect of Termination. In the event that this Agreement is terminated
pursuant to any provision hereof, including, without limitation, Sections 3.4, 3.5( e), or 9.2 or by
cOUli order, all provisions hereof shall tenuinate except that the Redeveloper's representations
and agreements under Sections 2.2, Section 3.8 (with respect to costs incurred prior to such
tennination) and Section 8.2 and the Authority's representations under Section 2.1 shall survive
such tennination and any cause of action arising hereunder prior to such termination shall not be
affected. Notwithstanding any termination of this Agreement, the Redeveloper's obligations
pursuant to the Escrow Agreement shall continue in effect as provided therein.
Section 10.10. Applicable Law. This Agreement shall be interpreted under the laws of
tile State of Minnesota.
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IN WITNESS WHEREOF, the Authority has caused this Agreement to be duly
executed in its name and behalf and the Redeveloper has caused this Agreement to be duly
executed in its name and behalf on or as of the date first above written.
HOUSING AND REDEVELOPMENT
AUTHORITY IN AND FOR THE
CITY OF HOPKINS
By
By
GPS DEVELOPMENT, LLC
By
By
STATE OF MINNESOTA )
) SS.
COUNTY OF )
The foregoing instrument was acknowledged before me this _ day of ,
2005, by and , the
and of the Housing and
Redevelopment Authority In and For the City of Hopkins, a public body politic and corporate
under the laws of the state of Minnesota.
Notary Public
STATE OF MINNESOTA )
) SS.
COUNTY OF )
2005,
The foregoing instrument was acknowledged before me this _ day of
by and
the
of GPS Development, LLC, a
and
Minnesota limited liability company, on behalf of the company.
Notary Public
37
SUMMARY OF CONTRACT FOR PRIVATE REDEVELOPMENT
BETWEEN
HOPKINS HOUSING AND REDEVELOPMENT AUTHORITY
AND
GPS DEVELOPMENT, LLC
The following is a brief summary of the major terms of the above referenced development
agreement:
l. RedeveloDer. The Redeveloper is GPS Development, LLC, a Minnesota limited
liability company.
2. Minimum Improvements. The Redeveloper has acquired certain property and
will attempt to acquire other property for the purpose of developing 220 for sale residential units
and approximately 7,900 square feet of retail/commercial space. The development wiIl be
constructed in three phases. All improvements constructed must confonn to construction plans
to be submitted to and approved by the Authority.
3. Authority ACQuisition. If the Redeveloper is unable to acquire a portion of the
property needed to construct the Minimum Improvements (the "Acquisition Property") the
Authority agrees to exercise its powers of eminent domain to acquire such property. Before the
Authority is obligated to commence the eminent domain action the Redeveloper must complete
certain actions related to the development. Those actions include:
(a) Provide to the Authority a financial plan demonstrating how the Redeveloper will
finance the development;
(b) Provide to the Authority information necessary for the Authority to undertake a
feasibility analysis of the development;
(c) Provide to the Authority a construction staging plan and a site plan for the
development;
Cd) Provide to the Authority a plan for the environmental remediation of the site;
(e) Provide to the Authority evidence that the Redeveloper has acquired all parcels of
the project site other than the Acquisition Property;
(f) Provide to the Authority a finn financing commitment for the first phase of the
development and conditional commitments for the other two phases;
(g) Complete a preliminary concept review of the development with the City and a
process to determine that compliance with the State Building Code is feasible; and
(h) Provide to the Authority acceptable organizational documents for the
condominium association to be created in cOlmection with residential portion of the
development.
4. Authoritv Security. Prior to the Authority's commencement of an eminent
domain action to acquire the Acquisition Property the Redeveloper is required to make certain
deposits and supply certain bank letters of credit to provide funds to pay the Authority's costs.
That security includes:
(a) A letter of credit m the amount of the Authority's appraised value of the
Acquisition Property;
(b) A combination of cash and letter of credit in the amount of relocation payments
due to persons displaced as a result of the project, based on an estimate of the Redeveloper's
relocation consultant;
(c) A deposit to pay the Authority's estimated attorneys' fees and costs related to the
eminent domain proceeding; and
(d) A deposit to pay the estimated costs of remediating adverse environmental
conditions on the Acquisition Property.
At the time that the Authority is required to make a deposit with the court of its appraised
value of the Acquisition Property, the Redeveloper will be required to make an' additional deposit
or supply an additional letter of credit or supply acceptable security in the amount of $3,500,000
to cover the risk that the court award to the owner of the Acquisition Property will be greater
than the Authority's appraised value.
5. Timin!!: of Construction. Subject to excused delays, construction of first phase
of the development will commence within thirty days after the Redeveloper acquires title to all
of the property on which the first phase will be built and will be competed within fourteen
months after commencement. Subject to excused delays, Phase II will be commenced by April
1,2007 and completed by June 30, 2008, and Phase III will be commenced by April I, 2008 and
completed by June 30, 2009.
6. Public Redevelopment Costs. The Redeveloper is responsible for all aspects of
constructing the project and for the initial payment of all costs of construction. However,
because of the extraordinary costs of acquisition and site preparation, tax increment financing
assistance is necessary to defray a portion of those costs. The Authority agrees to reimburse the
Redeveloper for a portion of those costs through the issuance and payment of Notes, as defined
in the contract.
7. Issuance of Notes. At the time that the Redeveloper completes each Phase of the
improvements and provides the Authority with documentation of tax increment qualified costs
the Authority will issue a Note to the Redeveloper. It is anticipated that the principal amount of
the Note for Phase I will be $ , for Phase II will be $ and for
Phase III will be $ . The Notes will accrue interest at the rate of6.75% per year. The
Notes will be payable solely from 95% of the tax increment generated from the Redeveloper's
development. The Authority will have no obligation to pay the Notes from any other source.
The Authority agrees that it will issue refunding notes to refinance the Notes on tenns available
in the public marketplace. If the refunding notes do not generated net proceeds equal to the
principal amounts of the Notes, the Authority will issue an excess costs note in the anlOunt of the
difference. The contract contains certain limitations on the level of profit that the Redeveloper
can derive from the overall development. If after review of the Redeveloper's final project costs
the Authority's financial consultant determines that the level of profit exceeds the allowable
level, then the principal amounts of the Notes, refunding notes or excess costs notes will be
reduced.
EHLERS
& ASSOCIATES INC
To:
Jim Kerrigan .- City of Hopkins
Kersten Elverum -- City of Hopkins
Robert Dieke - Bradley Dieke
Sid Inman - Ehlers & Associates
July 14, 2005
Risk Analysis for GPS Development Agreement
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From:
Date:
Subject:
As per your request we have reviewed the current draft of the Redevelopment
Agreement with GPS Development, LLC and the following are our comments on the
question of risks to the HRA.
Form of Assistance The HRA will be using Pay As You Go Revenue Notes as a
method of raising the funds for the Tax Increment portion of a project. The
developer is responsible for first expending the funds to pay for the agreed upon
qualified costs. Once the developer has proven that they have paid the qualified
cost, the HRA issues Pay As You Go Revenue Notes to the developer. The HRA
also pledges the future annual tax increment from the project to pay these notes If
in the future the tax increment is not sufficient to cover the annual payment
requirement for these notes, it is the developer's responsibly. The HRA has no
financial obligation above the future pledged tax increment.
But For Finding As part of the agreement the HRA is requiring that the developer
provide to the city copies of documents that justify the amount of assistance given.
It is assumed that "But For" this assistance, the project will not go forward. In
addition, the HRA is requiring a "Look Back" provision that requires that before the
HRA issues the notes mentioned above, it will review the same documents but with
actual expense and revenue information. In the event the project did better than
expected the amount of tax increment assistance will be adjusted down to reflect
that change.
Administration Costs The method of covering the HRA's legal and consultant
costs is through a deposit of funds from the developer. The developer has agreed
to deposit with the city funds that will cover the initial cost of the administration of the
project. They have also agreed that once those deposits are drawn down below a
certain level, the developer will provide additional deposits. There could be an issue
if the billings for legal and consultant costs are in process, they exceed the available
deposits, and the developer defaults and does not pay. The HRA could be
responsible for this amount. This amount would depend on the status of the legal
process, where bills are in the process and how much is deposited with the city.
Relocation and Environmental Costs The method of covering the HRA's
relocation and environmental costs is by requiring the developer to deposit an
LEADERS IN PUBLIC FINANCE
3060 Centre Pointe Drive
Roseville, MN 55113-1105
Phone: 651.697-8516 Fax: 651-697.8555
rkurt2@ehlers.inc.com
t
amount equal to the estimates of the costs. The estimates were prepared by third
party consultants. In the event the actual amounts spent are higher than the
estimates and the HRA needs more funds to pay these costs, the developer has
agreed to provide funds to cover those costs. In the event the amounts are higher
than the estimates and the developer is in default, the HRA may be responsible for
the difference.
Land Acquisition Costs The method of covering the HRA's land acquisition costs
is by requiring the developer to deposit an amount equal to the estimates of the
costs. The estimates were prepared by third party consultants and on
recommendations of legal counsel. In the event that the actual amounts spent are
higher than the estimates and the HRA needs more funds to pay these costs, the
developer has agreed to provide funds to cover those costs. In the event the
amounts are higher than- the estimates and the developer is in default, the HRA may
be responsible for the difference.
Project Phasing Due to its size, the project has been divided into three phases.
Prior to proceed ing with any phase the developer has certain activities and actions
that must take place. At this time the developer is only guaranteeing that it will
proceed with phase I. While there is no economic risk to the HRA, the developer
could proceed with phase I and not complete phases II or III.
Please let me know if you have questions or comments.