CR 01-91 Indemnity Agreement - Scherer Brothers Lumber
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July 13, 2001
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Indemnity Agreement~Schere-r Brothers Lumber
Council Report 2001-91
Proposed Action"
Staff recommends adoption of the following motion: Move to approve an indemnity aareement between
Scherer Brothers Lumber and the City of Hopkins relative to the property at the corner of Excelsior
Boulevard and 11th Avenue. known as the Justus Lumber property.
Adoption of this motion will cause an agreement to be signed that will commit the City of Hopkins to certain
obligations relative to environmental contamination on the Justus Lumber property and will provide for
specific protection for the City relative to investigation of the site.
Overvi w
The Justus Lumber property was historically a manufactured gas plant site and a burn and fill refuse site,
owned and operated by the City of Hopkins. In the 1970's the property was purchased by Justus Lumber
and has been operated as a lumber yard since.
Justus Lumber is desirous of selling the property to Scherer Brothers Lumber to operate in a similar capacity.
As with all contaminated or potentially contaminated sites, the proposed buyer is reasonably concerned about
purchasing and being potentially liable for actions that were taken on the site prior to their involvement with
the property. An indemnity agreement such as is being proposed, would provide a very specific and time-
limited indemnity to Scherer Brothers, giving them protection against potential negative impacts of
_co. ntamination related issues while furthering the cause of keeping the site viable and marketable within the
.,ommunity.
Staff is recommending the Council pass the indemnity agreement.
Primary Issues to Consider
Is the City exposing itself to additional liability by passing this agreement?
Representatives from Linquist and Vennum, most likely Jon ScoII, and Jerry Steiner will be present
at the Council meeting to address this issue. The simplest answer is that the City's liability is what
it is and since Scherer Brothers has no previous history on the site, there is reasonableness to
providing them with an indemnity for anything that happened prior to their arrival on the site.
It should be pointed out, however, that the passage of this agreement in no way is indicative future
indemnities beyond what is stated in this agreement.
Supportina Documentation
. Indemnity agreement
.k~~(}-~
Steven C. Mielke
City Manager
-'inanCiallmpact: $ N/A
Related Documents (CIP, ERP, etc.):
Notes:
Budgeted: Y/N
Source:
INDEMNITY AGREEMENT
(Royal Bros. LLC)
THIS INDEMNITY AGREEMENT made and entered into this _ day of
,2001, by and between THE CITY OF HOPKINS, a Minnesota municipal
corporation ("City"), and Royal Lumber, LLC Royal, a Minnesota limited liability company
("Royal" or, the "Indemnitee").
WITNESSETH:
WHEREAS, the City has had.ownership interests in portions of the real property legally
described on Exhibit "A" hereto ("Property") at various times since 1918, and during such
periods of ownership (and otherwise), there have been located on the Property, or portions
thereof: a manufactured gas plant (decommissioned approximately 1934), a sewage treatment
facility and a municipal waste disposal site; and
WHEREAS, such past usage, or other industrial or commercial uses, both on the
Property and adjacent to the Property, have caused the Property to become contaminated with
hazardous substances, pollutants or contaminants (as the terms are used and defined in
Minnesota Statutes, Section 115B.02), which pollutants, contaminants or hazardous substances
(collectively referred to hereinafter as the "Contamination") are more particularly described in
the environmental reports ("Environmental Reports") enumerated on Exhibit "B" attached
hereto and made a part hereof; and
WHEREAS, in order to facilitate a business transaction between the Indemnitee and
Justus Lumber Company, the current fee owner of the Property ("Justus"), or affiliates of Justus,
and without admitting liability whatsoever in connection with the deposit, placement, release,
threatened release or discharge of any Contamination, or any injury or. damage resulting
therefrom, the City has agreed to execute and deliver the limited indemnity herein set forth;
NOW, THEREFORE, in consideration of the premises, it is agreed as follows:
1. Limited Indemnity by City. City hereby agrees to defend, indemnify and hold
harmless the Indemnitee from and against any claim, demand, proceeding, judgment or cause of
action, in law or in equity, whether now existing or hereafter arising (hereinafter "Claim")
brought by: (i) a governmental agency having jurisdiction; or (ii) a private owner or occupier of
adjacent or downgradient land claiming loss, injury or damage with respect to such land or
personal injury attributable to the Contamination. It is expressly agreed that the limited
indemnity herein set forth shall not be applicable to any claim with respect to natural resource
damages, except to the extent such claim for natural resource damages is brought by a
governmental agency or such adjoining owner or occupier.
2. Voluntary Proceedings by Indemnitee. In the event Indemnitee participates
voluntarily in any program or process (or, except with respect to the application to the VIC
Program for No Association Determination, set forth below, the Indemnitee initiates a program
Doc# 1411161\4
or process), the purpose of which is the environmental remediation of any portion of the Property
or the obtaining of environmental liability protection, including, but not limited to, the Voluntary
Investigation and Cleanup ("VIC") Program of the Minnesota Pollution Control Agency
("MPCA"), without the prior written approval of the City, which consent shall not be
unreasonably withheld, this Indemnity Agreement shall not cover any costs or obligations which
may be incurred under such voluntary program unless and until the prior written consent of the
City shall have been first obtained, which consent may be conditioned upon agreement as to the
maximum contribution of the City thereunder. Any such cost incurred or amount contributed by
the City in such proceeding shall be applied to and credited against the amount of the City's
liability hereunder, as set forth in Paragraph 3, below.
Notwithstanding the foregoing, the City hereby consents to the Indemnitee's application
to the VIC Program for a No Association Determination, it being acknowledged that Justus or
Royal have submitted the Wenck reports listed on Exhibit "B" to the MPCA. This shall not be
construed as the undertaking of the City to contribute to any costs associated with such
application; the City shall not be liable for cost contribution unless and until it shall separately
agree thereto, in the manner set forth above.
3. Limitation of Liability of City. The extent of the liability of the City shall be as
provided under Minnesota Statutes, Chapter 466, the provisions of which are incorporated
expressly into this Agreement, . and the City's obligations under this Agreement shall be limited
to the maximum amounts set forth in Minnesota Statutes, Section 464.04. It is expressly
understood and agreed that nothing herein contained shall be construed to expand or to limit the
liability of the City. for the Contamination, and that the extent of any liability of the City
hereunder (which liability is not admitted by this Indemnity) shall not exceed the extent of the
City's liability as set forth in Minnesota Statutes, Chapter 466. Further, under no circumstances
will the liability of the City include loss of value of the Property or of any business conducted
thereon unless the City shall breach its obligations under Paragraph 5.
4. Term of Indemnity: Time Limit for Assertion of Claim. This Indemnity shall
have a term equal to the term of the lease of the Property dated July . 2001, by and
between Justus, as landlord, and Royal, as tenant thereunder, including any renewal options
therein contained, if, and to the extent exercised. Upon any termination of such lease, whether
by expiration thereof, or for any other reason, voluntary or involuntary, or by operation of law,
this Indemnity shall simultaneously terminate automatically and without notice. Further, this
Indemnity shall terminate automatically and without notice in the event of any disposition by
Royal, whether by lease, sublease, sale, transfer or assignment, whether voluntary or by
operation of law, of all or substantially all of the interest of Royal as the lessee of the Property,
or of any building or improvement thereon. As used herein, "disposition" shall include, in
addition to a direct transaction involving the leasehold interest itself, any reorganization, sale,
transfer or disposition of a controlling interest in Royal, whether voluntarily or by operation of
law; provided, however, that a corporate reorganization or transfer of interest in Royal to an
affiliated entity or corporation shall not be deemed a "disposition" hereunder. Any claim under
this Indemnity must be brought either within the term hereof (as set forth above) or not later than
the fifth (5th) anniversary of the date on which such lease is terminated, but in no event later than
the tenth (10th) anniversary of the date above- written.
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5. Claim Procedure: Right of City to Defend Proceeding or Conduct Remedial
Action: Cooperation of Indemnitee. Promptly upon receipt of notice, oral or written, of a Claim,
Indemnitee shall promptly give written notice to City, in care of its City Manager, of the
assertion of such Claim, and shall furnish to City any and all information in the possession of
Indemnitee with respect thereto. City shall have the right and option to respond to such Claim in
the name of the Indemnitee, as necessary, and to carry out any required investigation or remedial
action, as the City" in its reasonable discretion, may determine, emploYing consultants,
contractors and attorneys of its own selection. Indemnitee shall cooperate and join as necessary
in the defense of any such Claim, at no cost to the Indemnitee, and shall grant the City a license
for reasonable access by the City, or its engineers or contractors, to such portions of the Property
as shall be required pursuant to any investigation or the implementation of any remedial action.
The parties shall agree prior to any such entrance upon the Property by City as to the manner by
which such investigation, and any remedial action, shall be carried out; so long as the City
carries out such investigation or remedial action in accordance with such agreement, it shall not
be liable for business interruption or other damage to any business or activity conducted on the
Property by Indemnitee. The City's obligation to indemnify Indemnitee shall be conditioned
upon Indemnitee's cooperation with the City in responding to any Claim, including any remedial
or other activity in response thereto,
6. No Claim for Business Interruption or Damage. Indemnitee shall assert no claim
against the City with respect to any claimed business interruption, business damage or similar
loss or damage on account of the existence of the Contamination, or on account of any Claim, or
with respect to any action by the City in response thereto, except in the event the City shall
breach it obligations under Paragraph 5.
7. Contamination Covered by Indemnity. This Indemnity shall apply only to the
Contamination discussed in studies and reports listed on Exhibit "B" attached hereto (as well as
to any breakdown or daughter constituents thereof, or associated therewith), and shall not be
construed to cover any other contamination (whether or not identified in the reports listed on
Exhibit "B") attributable to Justus, or its affiliates or successors, or caused by the Indemnitee, or
any successor or affiliate of the Indemnitee. Nothing herein shall be construed to limit any right
of City to contribution by, or indemnity from, any third party responsible for such
Contamination, including, but 'not limited to, any Contamination placed or deposited or
discharged onto the Property subsequent to any ownership of the Property by the City or its
operations thereon.
8. Indemnity Personal to Indemnitee. This Indemnity is personal to the Indemnitee
'herein and cannot be transferred, sold, pledged or assigned, in whole or in part, or relied upon by
any party other than Indemnitee, or any benefit thereunder sold, transferred, pledged or assigned,
either voluntarily or by operation of law. It shall not run with title to the Property. There are no
third party beneficiaries of this Indemnity.
9. Applicable Law. Minnesota law governs the interpretation of this Indemnity.
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10. Approval of City Council Required. This Indemnity shall be effective only upon
the adoption of a resolution by the Hopkins City Council specifically approving the same.
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.
IN WITNESS WHEREOF, the parties hereto ha.ve entered into this Indemnity the date
and year above-written.
CITY OF HOPKINS,
a Minnesota municipal corporation
By:
Its:
ROYAL LUMBER LLC
a Minnesota limited liability company
By:
Its:
5
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EXHmIT A
/LEGAL DESCRIPTION
Lot 2, Block 1, Justus Addition, Hennepin County, Minnesota together with all rights of
Landlord to use a portion of Lot 1, Block 1, Justus Addition for ingress and egress purposes as
described in that certain Lease dated August 2, 1991, as amended, as evidenced by that certain
Memorandum of Lease between Landlord and Holiday Stationstores, Inc., a Minnesota
corporation as tenant, dated December 31, 1992, filed February 4, 1993, as Document Number
2343143, Office of the Registrar of Titles, Hennepin County.
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Doc# 1411161\4
INDEMNITY AGREEMENT
(Justus Lumber Company)
THIS INDEMNITY AGREEMENT made and entered into this _ day of
,2001, by and between THE CITY OF HOPKINS, a Minnesota municipal
corporation ("City"), and JUSTUS LUMBER COMPANY, a Minnesota corporation ("Justus"
or, the "Indemnitee").
WITNESSETH:
WHEREAS, the City has had ownership interests in portions of the real property legally
described on Exhibit "A" hereto ("Property") at various times since 1918, and during such
periods of ownership (and otherwise), there have been located on the Property, or portions
thereof: a manufactured gas plant (decommissioned approximately 1934), a sewage treatment
facility and a municipal waste disposal site; and
WHEREAS, such past usage, and other industrial or commercial uses, both on the
Property and adjacent to the Property, have caused the Property to become contaminated with
hazardous substances, pollutants or contaminants (as the terms are used and defined in
Minnesota Statutes, Section 115B.02), which pollutants, contaminants or hazardous substances
(collectively referred to hereinafter as the "Contamination") are more particularly described in
the environmental reports ("Environmental Reports") enumerated on Exhibit "B" attached
hereto and made a part hereof; and
WHEREAS, in order to facilitate a business transaction between the Indemnitee and
Scherer Bros., LLC, a Minnesota limited liability company, ("Scherer"), or affiliates of Scherer,
and without admitting liability whatsoever in connection with the deposit, placement, release,
threatened release or discharge of any Contamination, or any injury or damage resulting
therefrom, the City has agreed to execute and deliver the limited indemnity herein set forth;
NOW, THEREFORE, in consideration of the premises, it is agreed as follows:
1. Limited Indemnity by City. City hereby agrees to defend, indemnify and hold
harmless the Indemnitee from and against any claim, demand, proceeding, judgment or cause of
action, in law or in equity, whether now existing or hereafter arising (hereinafter "Claim")
brought by: (i) a governmental agency having jurisdiction; or (ii) a private owner or occupier of
adjacent or downgradient land claiming loss, injury or damage with respect to such land or
personal injury attributable to the Contamination. It is expressly agreed that the limited
indemnity herein set forth shall not be applicable to any claim with respect to natural resource
damages, except to the extent such claim for natural resource damages is brought by a
governmental agency or such adjoining owner or occupier. It is further understood that this
Indemnity shall cover only Claims which are also within the scope and coverage of an Indemnity
Agreement between Scherer and the City, of even date as the within Indemnity Agreement
("Scherer Indemnity"), and that all defenses which the City may have to claims under, or
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performance under the Scherer Indemnity, shall apply with equal force to claims under the
within Indemnity.
2. Limitation of Liability of City: Payment Under Scherer Indemnity a Pro Tanto
Discharge Hereunder. The extent of the liability of the City shall be as provided under
Minnesota Statutes, Chapter 466, the provisions of which are incorporated expressly into this
Agreement, and the City's obligations under this Agreement shall be limited to the maximum
amounts set forth in Minnesota Statutes, Section 464.04. It is expressly understood and agreed
that nothing herein contained shall be construed to expand or to limit the liability of the City for
the Contamination, and that the extent of any liability of the City hereunder (which liability is
not admitted by this Indemnity) shall not exceed the extent of the City's liability as set forth in
Minnesota Statutes, Chapter 466. Further, under no circumstances will the liability of the City
include loss of value of the Property or of any business conducted thereon.
To the extent City shall have incurred costs or expended funds under the Scherer
Indemnity, any amount so incurred or expended shall be credited against and reduce the liability
of the City under its indemnity obligation hereunder. The facts set forth by any person making a
Claim covered by the Scherer Indemnity shall, insofar as any indemnity is requested hereunder,
be deemed to constitute one ap.d the same "occurrence," within the meaning of Minnesota
Statutes, Section 466.04, Subd. 1 b. Any payment by, or expense incurred by, the City under the
Scherer Indemnity shall discharge, pro tanto, the obligation of the City to Justus hereunder.
3. Term of Indemnity: Time Limit for Assertion of Claim. This Indemnity shall
have a term equal to the term of the Scherer Indemnity. In the event of any termination,
voluntary or involuntary, of the Scherer Indemnity, the within Indemnity shall terminate
simultaneously, and without notice, and the period offive (5) years from the date of such
termination, within which a Claim may be brought, shall commence as of the date of the
termination of the Scherer Indemnity.
4. Claim Procedure: Right of City to Defend Proceeding: Cooperation of
Indemnitee. Promptly upon receipt of notice, oral or written, of a Claim, Indemnitee shall
promptly give written notice to City, in care of its City Manager, of the assertion of such Claim,
and shall furnish to City any and all information in the possession of Indemnitee with respect
thereto. City shall have the right and option to respond to such Claim in the name of the
Indemnitee, as necessary, and may carry out any action set forth in the Scherer Indemnity as
shall be available to it thereunder. The parties hereto agree that any agreement between Scherer
and the City with respect to any response by the City thereunder shall bind and apply to the
Indemnitee hereunder. The City's obligation to indemnify Indemnitee shall be conditioned upon
Indemnitee's cooperation with the City in responding to any Claim, including any remedial or
other activity in. response thereto.
5. Indemnity Personal to Indemnitee. This Indemnity is personal to the Indemnitee
herein and cannot be transferred, sold, pledged or assigned, in whole or in part, or relied upon by
any party other than Indemnitee, or any benefit thereunder sold, transferred, pledged or assigned,
either voluntarily or by operation of law. It shall not run with title to the Property. There are no
third party beneficiaries of this Indemnity.
2
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6. Applicable Law. Minnesota law governs the interpretation of this Indemnity.
7. Approval of City Council Required. This Indemnity shall be effective only upon
the adoption of a resolution by the Hopkins City Council specifically approving the same.
IN WITNESS WHEREOF, the parties hereto have entered into this Indemnity the date
and year above-written.
CITY OF HOPKINS,
a Minnesota municipal corporation
By:
Its:
JUSTUS LUMBER COMPANY
a Minnesota corporation
By:
Its:
3
Doc# 1414254\1
EXHmIT B
1. Wenck Report on Subsurface Soil Investigation, October 12, 2000.
2. Wenck Phase I Environmental Site Assessment, September 2000.
3. Bay West Summary of Nine Mile Creek Sampling, March 21,2000.
4. American Engineering Testing. Geotechnical Exploration Report for Holiday
Stationstore, May 4, 1992.
5. Braun Intertec Phase II Environmental Subsurface Investigation, April 2, 1992
~rr~tM~y.11~J_22Z.:.7
6. Braun Intertec Site History Review, September 13, 1991. including draft of same
g_al~Q__f~Qrn~!YJ_4.)_J.22_L7
7. Braun Intertec Report to City of Hopkins, June 12, 1991