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CR 95-78 Development Agreement - Meadow Creek Condominiums \ 1" Y 0 G k ~ -Y <::> . April 25, 1995 0 P K \ " Council Rpt #95-078 DEVELOPMENT AGREEMENT - MEADOW CREEK CONDOMINIUMS ProDosed Action Staff recommends approval of the following motion: Adopt resolution number 95-35 authorizing the execution of a development agreement between the City of Hopkins and Meadow Creek Condominiums contingent upon sucessful expiration of the veto period, With this motion, the City Manger and Mayor will be authorized to execute the agreement with the conditions as outlined in resolution 95-35. Overview The City of Hopkins has the authority to establish housing improvement areas under the Housing Improvement Act (1994 Minnesota Laws, Chapter 587, Article 9, Section 22 through 31). Within a housing improvement area, the City can sell bonds to pay for various improvements to individual housing units and common areas, Those bonds are then repaid through fees imposed on the owners of the units. The Meadow Creek Condominium Association has been working for more than two years on a . capital improvements program that is proposed to be financed though the City of Hopkins. In March, the City Council held the required public hearings, authorized the establishment of a housing improvement area for Meadow Creek and set the fees for the area. The veto period will end on May 5, 1995 and at this time it appears as though the project will be approved as only two vetos has been received to date. The attached development agreement specifies under what terms the bond funds will be released to the association to pay for construction costs. The agreement also provides for provisions in the event of deliquencies in the collection of the fees. Primary Issues to Consider o What is the purpose of the development agreement? o What are the major provisions of the development agreement? SUDDortim! Information o Resolution 95-35 o Development Agreement b~ween the City of Hopkins and Meadow Creek Condominiu s ". /./ ." L/~ . . ersten Elverum, H I ( / " . Development Agreement Council Rpt. 95-078 Page 2 Analvsis of the Issues o What is the purpose of the development agreement? The purpose of the development agreement is to outline the terms under which the City of Hopkins will sell the bonds and disburse the funds for the Meadow Creek Housing Improvement Project. It also provides the City with assurances that the Association will cover all delinquencies in the collection of the fees, if such funds are needed to pay principal and interest on the bonds. o What are the maj or provisions of the development agreement? The following are the major provisions of the proposed development agreement: Conditions of disbursement of funds Prior to the City releasing any funds for the project, the Association agrees to the following: o Approval of the plans and specifications from the City Inspector . o Obtain the necessary permits and licenses o Submit a total project cost statement o Certification that the items for which payment is requested were eligible for reimbursement and that sufficent funds remain in the account to pay for remaining work o Submission of lien waivers and proof of inspection by the City Inspector. Use of fund balances In the event there is money remaining in the project fund or excess funds generated through the fee revenue fund, the City has the option of applying the funds to redeem the bonds, specifYing that additional housing improvements are undertaken, disbursing the funds to be held by the Association in their replacement fund for future improvements or a combination of these options. Construction Plans The Association agrees to submit all construction plans to the City Building Official. The agreement also requires the Association to notify the City in the event of significant change orders and requires the improvements to be completed by December 31, 1995. Insurance The Association agrees to provide or have provided builder's risk insurance, comprehensive general liability insurance and worker's compensation insurance during the construction of the improvements. The Association also agrees to provide insurance against damage to the property, . comprehensive general public liability insurance and worker's compensation insurance for the term of the outstanding debt. . Development Agreement Council Rpt. 95-078 Page 3 Financial Statements, Plans and Reports The Association agrees to provide to the City audited financial statements of the Association for each fiscal year prepared by an independent certified public accountant. The Association also agrees to provide and updated financial plan and a written report by an independent engineer describing the condition of the property and the improvements each year for the term of the bonds. Delinquencies The Association agrees that ifin the event the revenues in the bond fund fan below 105% of the total principal and interest due on the bonds, the Association will provide to the City the funds necessary to bring the fund to 105% of the funds required. If the Association fails to make the required payment, the City has the ability to capture dues collected and owed to the Association together with all cash, investments and securities held by the Association. Other In the event of default of this agreement, the Association agrees to reimburse the City for all legal and other expenses incurred by the City. . Alternatives The City Council has the following alternatives relating to this issue: o Approve resolution 95-35 authorizing the execution of the development agreement as proposed. o Amend the development agreement and authorize execution. With this alternative, Council needs to review the amendments with legal council prior to approval. o Continue for further study. Continuing this item will affect the associations ability to obtain the short-term financing necessary for this project and will delay the start of construction . . . . . CITY OF HOPKINS RESOLUTION NO. 95-35 RESOLUTION APPROVING DEVELOPMENT AGREEMENT WITH WESTBROOKE CONDOMINIUM ASSOCIATION, d.b.a. MEADOW CREEK CONDOMINIUMS BE IT RESOLVED by the City Council ("Council") of the City of Hopkins ("City") as follows: Section 1. Recitals. 1.01. The City is authorized under 1994 Minnesota Laws, Chapter 587, Article 9, Sections 22 through 31 (the" Act") to establish by ordinance a housing improvement area within which housing improvements are made or constructed and the costs of the improvements are paid in whole or in part from fees imposed within the area. 1.02. By Resolution No. 94-55 adopted June 7, 1994, the City Council of the City approved the Act. 1.03. By Ordinance No. 95-759 adopted March 21, 1995 (the "Enabling Ordinance"), . the Council established Housing Improvement Area No. 1 in order to facilitate certain improvements to property known as the Meadow Creek Condominiums, referred to as the "Property." 1.04. By Resolution No. 95-18 adopted March 21, 1995 (the "Fee Resolution") the City Council imposed a housing improvement fee on Housing Units (as hereinafter defined) in Housing Improvement Area No.1 in order to finance certain housing improvements in that area. 1.05. The Act authorizes the City to issue bonds in the amount necessary to defray the expense to be incurred in making the housing improvements, which bonds are payable primarily from proceeds of the fee imposed under the Fee Resolution and may be further secured by the pledge of the City's full faith, credit and taxing power. 1.06. The Council has reviewed that certain Development Agreement (the "Agreement") between the City and Meadow Creek Condominiums Association, d.b.a. Westbrooke Condominium Association (the "Association"), setting out the respective obligations of the City and the Association regarding the housing improvements and the Property. Section 2. Agreement Approved. 2.01. The Mayor and City Manager are hereby authorized and directed to execute the Agreement in substantially the form presented to the Council on this date, subject to . modifications that do not materially alter the City's rights and obligations under the Agreement and that are approved by the Mayor and the City Administrator. which approval shall be conclusively evidenced by execution of the Agreement. , r e Holmes & Graven, Chartered 4 th Draft April 27, 1995 DEVELOPMENT AGREEMENT Between CITY OF HOPKINS, MINNESOTA and e WESTBROOKE CONDOMINIUM ASSOCIATION, d. b. a. MEADOW CREEK CONDOMINIUMS Dated as of: , 1995 This document was drafted by: HOLMES & GRAVEN, Chartered 470 Pillsbury Center Minneapolis, Minnesota 55402 Telephone: 337-9300 . SJB86372 HPl10-48 ----- . T ABLE OF CONTENTS e Pag-e PREAMBLE . .. It I 110 ... . . . . . . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . ... .. .. .. .. .. .. 1 ARTICLE I Definitions Section 1. 1 . Definitions .. . II .. .. . .. .. .. .. .. -II .. . .... .. .... It .. .. .. .. .. . .. II' . 2 ARTICLE II Representations and Warranties Section 2. 1 . Representations by the City .. .. .. . . ... . ... .. .. II .. II .. ... .. .. 5 Section 2. 2. Representations and Warranties by the Association .. .. II .. . .... .. It .. ... .. .. .. ... ... .. .. .. . .. .. .. .. .. .. .. .. 5 ARTICLE III Issuance of Bonds; Disbursement of Proceeds Section 3. 1 . Issuance of Bonds .. .. .. .. .. .. " .. .. .. .. .. .. .. .. .. .. .. .. oil .. .. .. 7 Section 3. 2 . Conditions Precedent to Initial Disbursement ... .. .. .. .. .. .. .. 8 Section 3. 3 . Further Conditions Precedent to All Disbursements . . . . . 8 Section 3.4. Requests for Disbursement .. .. . .. .. .. .. .. .. .. .. -II .. .. .. .. .. .. 9 Section 3. 5 . Conditions Precedent to the Final Disbursement . . . . . . . 10 Section 3. 6 . Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 . Section 3. 7 . Deposit of Funds by Association .. .. .. .. .. .. .. ... .. .. .. .. .. .. tI 10 Section 3.8. Application of Project Fund Balance .. .. .. .. .. .. .. .. .. .. .. .. .. 11 Section 3. 9 . Application of Fee Revenues Balance .. . II' .. .. .. .. I .. .. .. .. .. 11 ARTICLE IV Construction of Housing Improvements Section 4.1 . Construction of Housing Improvements . . . . . . . . . . . 13 Section 4. 2. Construction Plans .. .. .. .. .. .. .. .. . .. .. .. .. .. .. .. .. .. .. .. .. .. 13 Section 4. 3 . Commencement and Completion of Construction .. .. .. .. .. .. 14 Section 4.4. Certificate of Completion .. it .. .. .. .. + .. .. .. .. .. .. .. .. .. ... .. 14 AR TICLE V Insurance Section 5 .1 . Insurance .. .. .. . .. .. .. .. .. .. .. .. .. .. .. .. .. It . .. .. . .. . .. .. .. 15 Section 5.2. Subordination. . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE VI Special Covenants Section 6. 1 . No Warranty of Condition or Suitability ~ Indemnification 17 Section 6. 2 . Financial Statements .. .. .. .. .. .. .. .. .. .. .. .. . . . .. . ~ It . 17 Section 6. 3 . Financial Plan; Annual Reports . . . . . . . . . .. . It . . . . 17 Section 6. 4 . Records and Inspection . . . . f . . . . . . . . . . . . . . . 18 Section 6.5. Maintenance of Property . . . . . . . . . . . . . . . . . . . . 18 . Section 6. 6 . Covenant to Maintain Net Revenues Available for Debt Service8 SJB86372 HPllO-4B i Section 6. 7 . Assignment of Association Assets . . . . . . . . . . . . . . 19 . Section 6. 8 . Association to Maintain its Existence; Conditions Under Which Exceptions Permitted . . . . . . . . . . . . . . . . . . 20 Section 6. 9 . Prohibition Against Assignment of Agreement . . . . . . . . 20 Section 6.10. Notice of Fee Upon Transfer of Housing Units . . . . . . . . 20 ARTICLE VII Events of Default Section 7 . 1 . Events of Default Defined . . .... . . II . .. . .. .. .. .. .. .. .. . . 21 Section 7 . 2. Remedies on Default .. .. .. .. ~ .. .. ... .. .. .. .. .. .. .. .. .. .. .. .. .. 21 Section 7. 3. No Remedy Exclusive .. .. .. .. .. .. .. .. .. II' I . ,. .. .. .. . .. .. .. 21 Section 7 .4 . No Additional Waiver Implied by One Waiver . . . . . . . . . 21 ARTICLE VIII Additional Provisions Section 8. 1 . Conflict of Interests; City Representatives Not Individually Liable . . . . . . . . . . . . . . . . . . . . 22 Section 8. 2 . Equal Employment Opportunity .. .. .. .. .. .. . ... II .. .. .. .. .. .. 22 Section 8. 3 . Provisions Not Merged With Deed .. . II .. .. .. .. .. .. .. .. .. II .. 22 Section 8.4. Titles of Articles and Sections .. .. .. .. .. .. .. .. .. .. .. . .. . .. 22 Section 8.5. Notices and Demands . . . . . . . . . . . . . . . . . . . . . 22 Section 8. 6 . Counterparts .. .. .. .. .. ,. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. oil .. .. 22 Section 8. 7 . Recording . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 8. 8 . Binding Effect .. ... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. It . .. .. 23 - Section 8. 9 . Amendment .. It .. .. .. .. .. .. .. .. .. .. .. .. .. iii .. .. .. . .. .. .. .. .. iii .. 23 TESTIMONIUM 22 .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. II" . .. .. .. .. SIGNATURES .. .. .. .. .. .. .. .. .. .. .. .. .. . .. .. .. .. .. .. .. . .. .. .. .. .. .. .. .. .. .. .... .. .. .. 22 SCHEDULE A Description of Property SCHEDULE B Housing Improvements SCHEDULE C Disbursement Requisition of Authorized Corporation Representative e SJB86372 HPllO-48 ii DEVELOPMENT AGREEMENT . THIS AGREEMENT, made on or as of the day of . 1995, by and between the CITY OF HOPKINS, a Minnesota municipal corporation (the "City") and WESTBROOKE CONDOMINIUM ASSOCIATION, d. b.a. MEADOW CREEK CONDOMINIUMS, a Minnesota nonprofit corporation (the "Association"). WITNESSETH: WHEREAS, the City is authorized under 1994 Minnesota Laws, Chapter 587, Article 9, Sections 22 through 31 (the "Act") to establish by ordinance a housing improvement area within which housing improvements are made or constructed and the costs of the improvements are paid in whole or in part from fees imposed within the area; and WHEREAS, by Resolution No. 94-55 adopted June 7, 1994, the City Council of the City approved the Act; and WHEREAS, by Ordinance No. 95-759 adopted March 21, 1995 (the "Enabling Ordinance"), the Council established Housing Improvement Area No.1 in order to facilitate certain improvements to property known as the Meadow Creek Condominiums, which property is legally described in Schedule A hereto and is hereafter referred to as the "Property; 11 and WHEREAS, by Resolution No. 95-18 adopted March 21, 1995 (the "Fee . Resolution") the City Council imposed a housing improvement fee on Housing Units (as hereinafter defined) in Housing Improvement Area No. 1 in order to finance certain housing improvements in that area; and WHEREAS, the Act authorizes the City to issue bonds in the amount necessary to defray the expense to be incurred in making the housing improvements, which bonds are payable primarily from proceeds of the fee imposed under the Fee Resolution and may be further secured by the pledge of the City's full faith, credit and taxing power; and WHEREAS, prior to adoption of the Fee Resolution by the City Council, the Association submitted to the City a financial plan in accordance with the Act that provides for the Association to finance maintenance and operation of the common elements in the Meadow Creek Condominiums and a long-range plan to conduct and finance capital improvements therein; and WHEREAS, the City believes that development of the improvements to the Property pursuant to this Agreement, and fulfillment generally of this Agreement, are in the vital and best interests of the City and 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 Housing Improvement Area No.1 has been undertaken. 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: SJB86372 HPllO-48 1 . ARTICLE I Definitions Section 1. 1 . Definitions. In this Agreement, unless a different meaning clearly appears from the context: 31- "Act" means 1994 Minnesota Laws, Chapter 587, Article 9, Sections 22 through "Annual Debt Servicel1 means the amount of principal, interest and redemption premium, if any, payable on the Bonds on any August 1 and the next succeeding February 1. "Association" means Westbrooke Condominium Association, d.b.a. Meadow Creek Condominiums or its permitted successors and assigns. "Association's Authorized Representative" means the property manager retained by the Association to manage the Property. "Agreement" means this Agreement, as the same may be from time to time modified, amended, or supplemented. "Bonds" means the general obligation bonds or obligations issued by the City in connection with the Housing Improvement Area pursuant to the Act, and any . bonds or obligations issued to refund any Bonds. "Bond Fund" means the debt service fund for the Bonds to be established under the Bond Resolution. "Bond Resolution" means the resolution to be approved by the Council awarding the sale and establishing the terms of the Bonds. "City" means the City of Hopkins, Minnesota. "City Building Official" means Chief Building Inspector. "Certificate of Completionl1 means the certification provided to the Association, pursuant to Section 4.4 of this Agreement. "Completion Date" means the date of actual completion of the Housing Improvements as certified by the City Building Official pursuant to Section 4.4 hereof. "Construction Plansl1 means the plans, specifications, drawings and related documents on the construction work to be performed by the Association on the Property which shall be as detailed as the City may reasonably request to allow it to ascertain the nature and quality of the proposed construction work. I1Contractorl1 means any person, including subcontractors, who shall be . engaged to work on, or to furnish materials and supplies for the Housing Improvements. SJBB6372 HPllO-48 2 . "Council" means the City Council of the City. I1Countyl1 means the County of Hennepin, Minnesota. I1Draw Request" means the form, substantially in the form of Schedule C attached hereto, which is submitted to the City when a disbursement is requested and which is referred to in Section 3.4 hereof. ffEnabling Ordinancefl means Ordinance No. 95-759 adopted by the Council on March 21, 1995, which establishes the Housing Improvement Area. "Engineer" means Construction Consulting and Inspections, Ltd. , the engineers selected by the Association to prepare or cause to be prepared the Construction Plans for the Housing Improvements. f1Engineer's Contract'f means the agreement by and between the Association and the Engineer pertaining to preparation of the Construction Plans and supervision of construction. "Event of Default" means an action by the Association listed in Article VII of this Agreement. ffFee" means the housing improvement fee imposed on all Housing Units in the Housing Improvement Area pursuant to the Fee Resolution. ffFee Resolutionfl means Resolution No. 95-18, adopted by the Council on March . 21, 1995, which imposes the Fee. I1Fee Revenues" means all proceeds of the Fee payable to the City. flFinancial Advisor" means Ehlers & Associates or any successor Independent financial advisory firm retained by the City. ffFinancial Plan" means the 1995 Capital Improvement Program: Long-Term Financial Management (Reserve) Plan, dated March 15, 1995 submitted to the City, as amended annually pursuant to Section 6.3 hereof. "Fiscal YearPf means any year commencing January 1 and ending December 31. flHousing Improvementsfl means the improvements to the Property as set forth in Schedule B hereof. flHousing Unitll means real property and improvements thereon within the Housing Improvement Area, consisting of a one-dwelling unit, or an apartment as described in Minnesota Statutes, Chapter 515 or 515A, that is occupied by a person or persons for use as a residence. "Independent" , when used with reference to an attorney, engineer, architect, certified public accountant, or other professional person, means a person who (i) is in fact independent, (ii) does not have any material financial interest in the Association or the transaction to which his or her certificate or opinion relates (other It than the payment to be received for professional services rendered), and (ill) is not connected with the City or the Association as an officer, director or employee. SJll86J72 HPllO-48 3 . "Inspecting Engineer" means the Engineer. "Management Consultant" means a person or entity, experienced in the study and management of condominium housing and having a favorable reputation throughout the United States or the State of Minnesota for skill and experience in such work and, unless otherwise specified herein, retained or employed by the Association and acceptable to the City whose acceptance shall not be unreasonably withheld. "Maturity Date" means the date the Bonds have been fully paid, defeased or redeemed in accordance with their terms. "MortgageU means any mortgage made by the Association which is secured, in whole or in part, with the Property and which is a permitted encumbrance pursuant to the provisions of Section 6.9 of this Agreement. UNet Revenues Available for Debt Service" means, as of the date of calculation, the balance in the Bond Fund and any other fund into which Fee Revenues have been deposited as of the date of calculation, less the amount of fees, as estimated by the City's Financial Advisor, that are anticipated to be payable by the City in connection with the Bonds on or before the next Payment Date to the City's Financial Advisor, the registrar for the Bonds, and the paying agent for the Bonds. "Housing Improvement Area" means the real property located within Housing Improvement Area No.1. . "Payment Date" means any date on which the principal, interest and redemption premium, if any, is due and payable on the Bonds. "Project Fund" means the Project Fund to be created by the Bond Resolution. "Property" means the real property described in Schedule A of this Agreement. "State" means the State of Minnesota. "Unavoidable Delays" means delays beyond the reasonable control of the party seeking to be excused as a result thereof which are the direct result of strikes, other labor troubles, fire or other casualty to the Housing Improvements, litigation commenced by third parties which, by injunction or other similar judicial action, directly results in delays, or acts of any federal, state or local governmental unit (other than the City in exercising its rights under this Agreement) which directly result in delays. Unavoidable Delays shall not include delays in the Association's obtaining of permits or governmental approvals necessary to enable construction of the Housing Improvements by the dates such construction is required under Section 4.3 of this Agreement. e SJBB6372 HPllO-48 4 ARTICLE II . Representations and Warranties Section 2.1. Representations by the City. The City makes the following representations as the basis for the undertakings on its part herein contained: (a) The City is a municipal corporation under the laws of the State and has the power to enter into this Agreement and carry out its obligations hereunder. (b) The undertaking of the Housing Improvements and the issuance by the Municipality of the Bonds are authorized by the Act. (c) On March 7} 1995, after receipt of petitions by owners of at least 25 percent of the Housing Units in the Housing Improvement Area and due publication and mailing of notice of hearing, the Council held a public hearing on the adoption of the Enabling Ordinance and approved a first reading thereof. (d) On March 21, 1995, after receipt of petitions by owners of at least 25 percent of the Housing Units in the Housing Improvement Area and due publication and mailing of notice of hearing, the Council held a public hearing on the adoption of the Fee Resolution and adopted the Fee Resolution and the Enabling Ordinance. (e) The periods for veto of both the Enabling Ordinance and the Fee Resolution have expired without objection by owners of at least 35 percent of the . Housing Units in the Housing Improvement Area, all in accordance with the Act. (f) To finance costs of the Housing Improvements, the City proposes to issue the Bonds as provided in the Act, and to disburse the proceeds thereof to the Association pursuant to this Agreement. The City will initially issue Bonds in the aggregate principal amount as described in Section 3.1 hereof and the Bonds shall be in the form and shall be subject to the terms and provisions set forth in the Bond Resolution and the terms of this Agreement. (g) There is no litigation pending or, to the best of its knowledge, threatened against the City relating to the Housing Improvements or to the Bonds or questioning the powers or authority of the City under the Act, or questioning the corporate existence or boundaries of the City or the title of any of the present officers of the City to their respective offices. (h) The execution, delivery and performance of this Agreement does not violate any agreement or any court order or judgment in any litigation to which the City is a party or by which it is bound. Section 2.2. Representations and Warranties by the Association. The Association represents and warrants that: (a) The Association is a nonprofit corporation, duly organized and in good standing under the laws of the State of Minnesota, is not in violation of any provisions of its articles of incorporation, bylaws or the laws of the State, is duly . authorized to transact business Within 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 board of directors. SJB86372 HPllD-48 5 . (b) T~e Association will construct, operate and maintain the Housing Improvements In accordance with the terms of this Agreement, the Financial Plan, and all local, state and federal laws and regulations (including, but not limited to, environmental, zoning, building code and public health laws and regulations). (c) The Housing Improvements constitute a permitted use under any applicable zoning laws. (d) The Association has received no notice or communication from any local, state or federal official that the activities of the Association or the City in the Housing Improvement Area may be or will be in violation of any environmental law or regulation (other than those notices or communications of which the City is aware) . The Association is aware of no facts the existence of which would cause it to be in violation of or give any person a valid claim under any local, state or federal environmental law , regulation or review procedure. (e) The Association will construct the Housing Improvements in accordance with a11local, state or federal energy-conservation laws or regulations. (f) The Association will obtain, in a timely manner, all required permits, licenses and approvals, and will meet, in a timely manner, all requirements of all applicable local, state and federal laws and regulations which must be obtained or met before the Housing Improvements may be lawfully constructed. (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 Association is now a party or by which it is bound, or constitutes a default under any of the foregoing. (h) Whenever any Event of Default occurs and if the City 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 Association under this Agreement, the Association agrees that it shall, within ten days of written demand by the City pay to the City the reasonable fees of such attorneys and such other expenses so incurred by the City. . SJ1l86 3 72 HPllO-48 6 . AR TICLE III Issuance of Bonds; Disbursement of Proceeds Section 3. 1 . Issuance of Bonds. (a) In order to provide funds to defray the costs of the Housing Improvements, the City will issue the Bonds in the maximum principal amount that is supported by the Fee Revenues and will produce total funds in the amount of $1,100,000 (the "Net Project Amount"), including; (i) proceeds of the Bonds, net of costs of issuance, administrative costs and capitalized interest through August 1, 1996; (ll) all Fee Revenues prepaid by owners of Housing Units in accordance with the Fee Resolution; and (ill) certain additional Fee Revenues deposited into the Project Fund in accordance with Section 3.1(b) hereof; provided that the Net Project Amount may be such lesser amount mutually agreed by the Association and the City in the event the cost of Housing Improvements and the total Fee is reduced in accordance with the Fee Resolution. At closing on issuance of the Bonds, proceeds (net of capitalized interest, costs of issuance and administrative costs) together with prepaid Fee Revenues, shall be deposited by the City into the Project Fund for disbursement to the Association in accordance with the terms of this Agreement. Moneys in the Project Fund shall be subject to withdrawal from time to time only for the purposes of paying the costs of Housing Improvements, or subject to any applicable provision of law, for payments theretofore made by the Association for such costs. None of the funds in the Project Fund shall be used for any purposes other than payment or reimbursement of such costs of Housing Improvements, except as otherwise provided . in Section 3. 9 hereof. The City will issue the Bonds by September 30, 1995, subject to Unavoidable Delays and the City's ability to issue the Bonds under existing laws and market conditions. (b) Under the Bond Resolution, the City will deposit into the Bond Fund capitalized interest through August 1, 1996, together with Fee Revenues in the amount necessary to pay when due the principal, interest and redemption premium, if any, on the Bonds. Subject to the pledge described in the previous sentence, Fee Revenues received by the City after August 1, 1996 shall be deposited into the Project Fund on or before February 1, 1997 in the amount necessary to bring the total amount deposited into the Project Fund to the Net Project Amount (without regard to any disbursements from the Project Fund). All other Fee Revenues in excess of the amount necessary to pay when due the principal, interest and redemption premium, if any, on the Bonds will be deposited into a separate revenue account to be established under the Bond Resolution and maintained by the City until the Maturity Date. Subject to the prior pledge of Fee Revenues to payment of principal and interest on the Bonds, the City may at its sole discretion apply funds in such revenue account; (i) to pay registrar and paying agent fees, if any, in connection with the Bonds; (ll) to pay other administrative costs in connection with the Bonds or the Housing Improvement Area; (ill) to pay costs in connection with enforcement by the City of the Association's obligations under this Agreement (provided that any such payment is subject to reimbursement by the Association pursuant to Section 2. 2(h) hereof, and nothing in this Section 3 .1(b) shall be construed to require the City to pay costs of enforcement in the first instance as provided herein); and (iv) in accordance with Section 3.9 hereof. . (c) The City and Association agree, and the Bond Resolution shall so provide, that interest earnings on funds in the Project Fund, the Bond Fund, and 5JB86372 8PllO-48 7 . ~ny other revenue fund established under the Bond Resolution, shall be deposited In and credited to the respective fund from which the interest was derived. Section 3 . 2 . Conditions Precedent to Initial Disbursement. The obligation of the City to make the initial disbursement hereunder shall be subject to the condition precedent that the Association shall be in compliance with the conditions contained in Section 3.3 hereof and the further condition precedent that the City shall have received, on or before the date of such initial disbursement hereunder, the following: (a) A copy of the Construction Plans, approved by the City Building Official in accordance with Section 4.2 hereof and in detail sufficient to enable the Association to authorize commencement of construction of the Housing Improvements, certified by the Engineer and the Association; (b) Copies of the Engineer1s Contract, the Construction Contract, and such subcontracts as may be reasonably requested from time to time by the City; (c) A sworn construction statement duly executed by the Association and the Engineer for the Housing Improvements showing estimates of all anticipated Contractors' contract or subcontracts for specific portions of the work on the Housing Improvements and the amounts anticipated to become due each such Contractor, including all costs and expenses of any kind incurred and to be incurred in construction the Housing Improvements; (d) A total project cost statement, incorpora ting estimates of the . construction costs as shown on the sworn construction statement described in paragraph (d) above and setting forth all other costs and expenses of any kind anticipated to be incurred in completion of the Housing Improvements and sworn to by the Association to be a true, complete and accurate account of all costs actually incurred and a reasonably accurate estimate of all costs to be incurred in the future; (e) Copies of any licenses and permits which the Inspecting Engineer certifies as necessary and sufficient to construct the Housing Improvements, including all foundation and grading permits and building permits from time to time necessary for such construction. Section 3. 3. Further Conditions Precedent to All Disbursements. The obligation of the City to make the initial disbursement hereunder and each subsequent disbursement hereunder shall be subject to the condition precedent that the Association shall be in compliance with all conditions set forth in Section 3.2. hereof, and the further condition precedent that on the date of such disbursement: (a) The City has received a written statement from the Association's Authorized Representative certifying with respect to each payment: (1) that none of the items for which the payment is proposed to be made has formed the basis for any payment theretofore made from the Project Fund; (II) that each item for which the payment is proposed to be made is or was necessary in connection with the Housing Improvements; and (Ill) that following such proposed payment sufficient moneys will remain on deposit in the Project Fund to provide for payment in full of all remaining costs estimated to be incurred in order to complete the Housing . Improvements. In the case of any contract providing for the retention of a portion of the contract price) there shall be paid from the Project Fund only the net amount remaining after deduction of any such portion. SJIlB6372 IlP 110-48 8 (b) No Event of Default under this Agreement or event which would - constitute such an Event of Default but for the requirement that notice be given or that a period of grace or time elapse, shall have occurred and be continuing. (c) No determination shall have been made by the Inspecting Engineer that the amount of undisbursed moneys, together with expected earnings thereon and any amount of other funds deposited in the Project Fund by the Association or to be deposited under Section 3. 7 hereof, are insufficient to pay expenses of any kind which reasonably may be anticipated in connection with the completion of the Housing Improvements; or if such a determination has been made and notice thereof sent to the Association, the Association has deposited the necessary funds with the City in accordance with Section 3.7 hereof. (d) The disbursement requirements set forth in Section 3.4 hereof have been satisfied. (e) If requested by the City, the City shall be furnished with a statement of the Association and of any Contractor, in form and substance satisfactory to the City setting forth the names, addresses and amounts due or to become due as well as the amounts previously paid to every Contractor, subcontractor, person, firm or corporation furnishing materials or performing labor entering into the construction of any part of the Housing Improvements. (f) No license or permit necessary for the construction of the Housing Improvements shall have been revoked or the issuance thereof subjected to challenge before any court or other governmental authority having or asserting jurisdiction . thereover. Section 3.4. Requests for Disbursement. (a) Whenever the Association desires a disbursement to be made hereunder, which shall be no more often than monthly, the Association shall submit to the City a Draw Request, duly executed on behalf of the Association, setting forth the information requested therein. Disbursements will be made the Wednesday following the first Tuesday of each month, provided the Draw Request is received by the 20th day of the preceding month. Each Draw Request shall be limited to amounts equal to (i) the total of such costs actually incurred and owing (or previously paid) by the Association to the date of such Draw Request for work performed on and materials used in the Housing Improvements, plus (ll) the cost of materials and equipment not incorporated in the Property, but delivered to and suitably stored at the Proper~y; less, (ill) (a) a minimum of five percent, and (b) at all times less prlOr dis bursemen ts . Notwithstanding anything herein to the contrary, no disbursements for materials stored at the Property will be authorized unless the Association shall provide adequate security for such storage. Each Draw Request shall constitute a representation and warranty by the Association that all representations and warranties set forth in this Agreement are true and correct as of the date of such Draw Request. (b) At the time of submission of each Draw Request, the Association shall submit the following to the City: (i) A written lien waiver from each Contractor for work done and . materials supplied by it which were paid for pursuant to the next preceding Draw Request. SJBB6372 HPllO-4B 9 . (ll) Such other supporting evidence as may be requested by the City to substantiate all payments which are to be made out of the relevant Draw Request and/or to substantiate all payments then made with respect to the Housing Improvements. (c) If on the date a disbursement is desired, the Association has performed all of its agreements and complied with all requirements theretofore to be performed or complied with hereunder, including satisfaction of all applicable conditions precedent contained in Article III hereof, upon approval by the Council the City shall make a disbursement to the Association in the amount of the requested disbursement, or such lesser amount as shall be approved. Section 3.5 . Conditions Precedent to the Final Disbursement. The making of the final disbursement by the City from the Project Fund shall be subject to the condition precedent that the Association shall be in compliance with all conditions set forth in Sections 3.2 through 3.4 hereof and, further, that the following conditions shall have been satisfied prior to the Completion Date: (a) The Housing Improvements have been substantially completed in accordance with the Construction Plans and Article IV hereof, and the City shall have received a certificate of completion from the Association and the Inspecting Engineer, certifying that to the best of their knowledge (i) work on the Housing Improvements has been completedin accordance with the Construction Plans and all other labor, services, materials and supplies used in such work have been paid for; (ii) the completed Housing Improvements conform with all applicable building laws and regulations of the governmental authorities having jurisdiction over the Housing . Improvements; and (ill) lien waivers submitted to the City under Section 3.5 (c) cover all labor, services materials and supplies in connection with the Housing Improvements. (b) The City shall have received satisfactory evidence that all work requiring inspection by municipal or other governmental authorities ha ving jurisdiction has been duly inspected and approved by such authorities and by the bureau, corporation or office having jurisdiction, and that all requisite certificates of occupancy and other approvals have been issued. (c) The City shall have received a lien waiver from each Contractor for all work done and for all materials furnished by it for the Housing Improvements. Notwithstanding anything to the contrary in this Article III, the City shall not disburse the amount deposited into the Project Fund from Fee Revenues pursuant to Section 3.1 (b) hereof until the date such Fee Revenues are deposited in the Project Fund, subject to compliance by the Association with all other requirements of this Section. Section 3. 6 . Waiver. The City may, in its sole discretion, without notice to or consent from any other party, waive any or all conditions for disbursement set forth in this Article. However, the making of any disbursement prior to fulfillment of any condition therefor shall not be construed as a waiver of such condition, and the City shall have the right to require fulfillment of any and all such conditions prior to authorizing any subsequent disbursement. . Section 3.7. Deposit of Funds by Association. If the City shall at any time in good faith determine that the amount of funds then on deposit in the Project Fund, S.TIl86372 HPllO-48 10 . together with expected earnings thereon, is less than the amount required to pay all costs and expenses of any kind which reasonably may be anticipated in connection with the completion of the Housing Improvements and shall thereupon send written notice thereof to the Association specifying the additional amount required to be deposited by the Association to provide sufficient funds to complete the Housing Improvements, the Association agrees that it will, within ten (10) calendar days of receipt of any such notice, deposit with the City the amount of funds specified in the notice and shall authorize the City and to disburse such funds prior to disbursement of any additional proceeds of the Bonds. Section 3. 8 . Application of Project Fund Balance. Any amounts remaining in the Project Fund upon completion of the Housing Improvements shall be applied in accordance with Section 3.9 hereof. Section 3.9. Application of Fee Revenues Balance. In the event that, (i) any balance remains in the Project Fund upon the final disbursement therefrom for costs of the Housing Improvements; or (ii) at any time before the Maturity Date the City has available to it Fee Revenues (excluding the proceeds of any refunding Bonds) in the amount sufficient to redeem or defease the Bonds in advance of their maturity, as determined by the City's Financial Advisor, the City may, in its sole discretion: (a) apply such excess Fee Revenues or Project Fund balance to redeem or defease all or a any portion of the Bonds; or (b) by resolution of the Council, specify additional housing improvements (as defined in the Enabling Ordinance) and transfer all or any portion . of such excess Fee Revenues or Project Fund balance, as the case may be, in the amount of the cost of such improvements into a project fund (the "Supplemental Project Fund"). Amounts in the Supplemental Project Fund shall be disbursed to the Association to pay the cost of the housing improvements specified by the City, in accordance with all the disbursemen t procedures set forth in Sections 3. 2 through 3.6 hereof; or (c) by resolution of the Council, disburse all or any portion of such excess Fee Revenues or Project Fund balance, as the case may be, to the Association for deposit into the replacement fund maintained by the Association (the "Replacement Reserve Fund"). The Association shall establish and maintain a separate subaccount in the Replacement Reserve Fund (the "Excess Revenue Subaccount") in which excess Fee Revenues or any Project Fund balance deposited hereunder, together with interest earnings thereon, shall be maintained. Amoun ts in the Excess Revenue Subaccount of the Replacement Reserve Fund shall be expended only for housing improvements (as defined in the Enabling Ordinance) that are selected by the Association; provided that before making any disbursement of funds from the Excess Revenue Subaccount, the Association shall submit written plans and cost estimates for such housing improvements to the City Building Official, which plans shall be deemed approved unless rejected in writing by the City Building Official within 30 days after receipt thereof; or . (d) any combination of paragraphs (a), (b) and (c) above. SJB86372 HPllO-48 11 . Any balance remaining in the Supplemental Project Fund (if any) after payment of all Supplemental Housing Improvements, and any balance remaining after the Maturity Date in the Bond Fund, the Project Fund or any other fund into which Fee Revenues have been deposited shall be transferred by the City to the Association for deposit into the Excess Revenue Subaccount of the Replacement Reserve Fund. Expenditures from the Excess Revenue Subaccount shall be subject to the conditions described in clause (c) above. All covenants and obligations of the Association under this Section shall survive the Maturity Date. . . SJBB6372 HPll0-48 12 ARTICLE IV . Construction of Housinj?: Improvements Section 4.1. Construction of Housing- Improvements. The Association agrees that it will construct the Housing Improvements on the Property in accordance with the approved Construction Plans and at all times prior to the Maturity Date will operate and maintain, preserve and keep the Housing Improvements or cause the Housing Improvements to be maintained, preserved and kept with the appurtenances and every part and parcel thereof, in good repair and condition, all in accordance with Article VI hereof. Section 4. 2. Construction Plans. (a) Before issuance of the Bonds, the Association shall submit the Construction Plans to the City Building Official, who shall review such plans on behalf of the City. The Construction Plans shall provide for the construction of the Housing Improvements and shall be in conformity with the this Agreement, and all applicable State and local laws and regulations. The City Building Official will approve the Construction Plans in writing if : (i) the Construction Plans conform to the terms and conditions of this Agreement; (ll) the Construction Plans conform to all applicable federal, state and local laws, ordinances, rules and regulations; (ill) the Construction Plans are adequate to provide for construction of the Housing Improvements; and (iv) no Event of Default has occurred. No approval by the City Building Official shall relieve the Association of the obligation to comply with the terms of this Agreement, applicable federal, state and local laws , ordinances, rules and regulations, or to construct the Housing . Improvements in accordance therewith. No approval by the City Building Official shall constitute a waiver of an Event of Default. If approval of the Construction Plans is requested by the Association in writing at the time of submission, such Construction Plans shall be deemed approved unless rejected in writing by the City Building Official, in whole or in part. Such rejections shall set forth in detail the reasons therefore, and shall be made within 30 days after the date of their receipt by the City Building Official. If the City Building Official rejects any Construction Plans in whole or in part, the Association shall submit new or corrected Construction Plans within 30 days after written notification to the Association of the rejection. The provisions of this Section relating to approval, rejection and resubmission of corrected Construction Plans shall continue to apply until the Construction Plans have been approved by the City Building Official. The City Building Official's approval shall not be unreasonably withheld. Said approval shall constitute a conclusive determination that the Construction Plans (and the Housing Improvements, constructed in accordance with said plans) comply to the City Building Official's satisfaction with the provisions of this Agreement relating thereto. (b) If the Association desires to make any material change in the Construction Plans after their approval by the City Building Official, the Association shall submit the proposed change to the City Building Official for approval. For the purposes of this Section, a Hmaterial changelt means any change that (i) increases or decreases the total cost of the Housing Improvements by more than $5,000, or (ll) involves any change in construction materials or design that reasonably requires review for compliance with state and local laws and regulations. If the Construction . Plans, as modified by the proposed change, conform to the requirements of this Section 4 .2 of this Agreement with respect to such previously approved Construction Plans, the City Building Official shall approve the proposed change and notify the SJB86372 HP110-48 13 --... ------... .---...- .-- ------- -------- . Association in writing of its approval. Such change in the Construction Plans shall . , III any event, be deemed approved by the City Building Official unless rejected, in whole or in part, by written notice by the City Building Official to the Association, setting forth in detail the reasons therefor. Such rejection shall be made within ten (10) days after receipt of the notice of such change. The City Building Official's approval of any such change in the Construction Plans will not be unreasonably withheld. Section 4. 3 . Commencement and Completion of Construction. Subject to Unavoidable Delays, the Association shall complete the construction of the Housing Improvements by December 31, 1995. All work with respect to the Housing Improvements to be constructed or provided by the Association on the Property shall be in conformity with the Construction Plans as submitted by the Association and approved by the City. The Association agrees for itself, its successors and assigns, and every successor in interest to the Property, or any part thereof, that the Association, and such successors and assigns, shall promptly begin and diligently prosecute to completion the construction of the Housing Improvements thereon, and that such construction shall in any event be commenced and completed within the period specified in this Section 4.3 of this Agreement. Until construction of the Housing Improvements has been completed, the Association shall make reports, in such detail and at such times as may reasonably be requested by the City as to the actual progress of the Association with respect to such construction. Section 4.4. Certificate of Completion. (a) Promptly after substantial . completion of the Housing Improvements in accordance with those provisions of the Agreement relating solely to the obligations of the Association to construct the Housing Improvements (including the dates for beginning and completion thereof), the City will furnish the Association with an appropriate instrument so certifying. Such certification by the City shall be a conclusive determination of satisfaction and termination of the agreements and covenants in the Agreement with respect to the obligations of the Association, and its successors and assigns, to construct the Housing Improvements and the dates for the beginning and completion thereof. Such certification and such determination shall not constitute evidence of compliance with or satisfaction of any obligation of the Association under Article VI hereof. (b) The certificate provided for in this Section 4.4 of this Agreement shall be in such form as will enable it to be recorded in the proper office for the recordation of deeds and other instruments pertaining to the Property. If the City shall refuse or fail to provide any certification in accordance with the provisions of this Section 4.4 of this Agreement, the City shall, within thirty (30) days after written request by the Association, provide the Association with a written statement t indicating in adequate detail in what respects the Association has failed to complete the Housing Improvements in accordance with the provisions of the Agreement, or is otherwise in default, and what measures or acts it will be necessary, in the opinion of the City, for the Association to take or perform in order to obtain such certifica tion. (c) The construction of the Housing Improvements shall be deemed to be substantially completed as determined by the City Building Official, who may execute . the certificate of completion on behalf of the City. SJB86372 HPllD-48 14 . ARTICLE V Insurance Section 5. 1 . Insurance. (a) The Association will provide and maintain or cause to be provided and maintained at all times during the process of constructing the Housing Improvements an All Risk Broad Form Basis Insurance Policy and, from time to time during that period, at the request of the City, furnish the City with proof of payment of premiums on policies covering the following: (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 Housing Improvements at the date of completion, and with coverage available in nonreporting form on the so-called lIaIl risk" form of policy. The interest of the City shall be protected in accordance with a clause in form and content satisfactory to the City; (ll) Comprehensive general liability insurance (including operations, contingent liability, operations of subcontractors, completed operations and contractual liability insurance) together with an Owner's Contractor's Policy with limits against bodily injury and property damage of not less than $1,000,000 for each occurrence (to accomplish the above-required limits, an umbrella excess liability policy may be used); and . (ill) Workers' compensation insurance provided by all Contractors. (b) Upon completion of construction of the Housing Improvements and prior to the Maturity Date, the Association shall maintain, or cause to be maintained, at its cost and expense, and from time to time at the request of the City shall furnish proof of the payment of premiums on, insurance as follows: (i) Insurance against loss and / or damage to the Property and the Housing Improvements under a policy or policies covering such risks as are ordinarily insured against by similar businesses. (ii) Comprehensive general public liability insurance, including personal injury liability (with employee exclusion deleted), against liability for injuries to persons and/or property, in the amount for each occurrence and for each year of $1,000,000, and shall be endorsed to show the City as additional insured. (ill) Such other insurance, including workers ' compensationinsurance respecting all employees of the Association, in such amount as is customarily carried by like organizations engaged in like activities of comparable size and liability exposure; provided that the Association may be self-insured with respect to all or any part of its liability for workers t compensation. (c) All insurance required in Article V of this Agreement shall be taken out and maintained in responsible insurance companies selected by the Association which are authorized under the laws of the State to assume the risks covered thereby. . Upon request, the Association will deposit annually with the City policies evidencing all such insurance, or a certificate or certificates or binders of the respective insurers stating that such insurance is in force and effect. Unless otherwise SJB86372 HPllO-4B 15 . provided in this Article V of this Agreement each policy shall contain a provision that the insurer shall not cancel nor modify it in such a way as to reduce the coverage provided below the amounts required herein without giving written notice to the Association and the City at least thirty (30) days before the cancellation or modification becomes effective. In lieu of separate policies 1 the Association may maintain a single policy, blanket or umbrella policies, or a combination thereof, having the coverage required herein, in which event the Association shall deposit with the City a certificate or certificates of the respective insurers as to the amount of coverage in force upon the Housing Improvements. (d) The Association agrees to notify the City immediately in the case of damage exceeding $100,000 in amount to, or destruction of, the Property, the Housing Improvements or any portion thereof resulting from fire or other casualty. In such event the Association will forthwith repair, reconstruct and restore the Housing Improvements to substantially the same or an improved condition or value as it existed prior to the event causing such damage and, to the extent necessary to accomplish such repair, reconstruction and restoration, the Association will apply the Net Proceeds of any insurance relating to such damage received by the Association to the payment or reimbursement of the costs thereof. The Association shall complete the repair, reconstruction and restoration of the Housing Improvements and the Property, whether or not the Net Proceeds of insurance received by the Association for such purposes are sufficient to pay for the same. Any Net Proceeds remaining after completion of such repairs, construction and restoration shall be the property of the Association. . (e) The Association and the City agree that all of the insurance provisions set forth in this Article V shall terminate upon the earlier of the Maturity Date or termination of this Agreement. Section 5. 2 . Subordination. Notwithstanding anything to the contrary contained in this Article V, the rights of the City with respect to the receipt and application of any proceeds of insurance shall, in all respects, be subject and subordinate to the rights of any lender under a Mortgage approved pursuant to Section 6.9 of this Agreement. . SJEB6372 HPllO-48 16 . ARTICLE VI Special Covenants Section 6. 1 . No Warranty of Condition or Suitability, Indemnification. (a) The City does not make any warranty, either express or implied, as to the design or capacity of the Housing Improvements, as to the suitability for operation of the Housing Improvements or that they will be suitable for the Association's purposes or needs. The Association releases the City from, agrees that the City shall not be liable for, and agrees to hold the City, its Council and its respective officers and employees, harmless against, any claim, cause of action, suit or liability for any loss or damage to property or any injury to or death of any person that may be occasioned by any cause whatsoever pertaining to the Housing Improvements or the Property or the use thereof. (b) The Association further agrees to indemnify and hold harmless the City its officers and employees, against any and all losses, claims, damages or liability to which the City its officers and employees, may become subject under any law arising out of any act, omission, representation or misrepresentation of the Association in connection with the issuance and sale of the Bonds and the carrying out of the transactions contemplated by this Agreement, and to reimburse the City, its officers and employees, for any out-of-pocket legal and other expenses (including reasonable counsel fees) incurred by the City, its officers and employees, in connection with investigating any such losses, claims, damages or liabilities or in . connection with defending any actions relating thereto. The City agrees, at the request and expense of the Association, to cooperate in the making of any investigation in defense of any such claim and promptly to assert any or all of the rights and privileges and defenses which may be available to the City. The provisions of this Section shall survive the payment and redemption of the Bonds. (c) All covenants, stipulations, promises, agreements and obligations of the City contained herein shall be deemed to be the covenants, stipulations, promises, agreements and obligations of the City and not of any governing body member, officer, agent, servant or employee of the City in the individual capacity thereof. Section 6. 2. Financial Statements. The Association agrees to furnish to the City, by no later than 120 days after the end of each Fiscal Year until the later of the Maturity Date and the date all excess Fee Revenues and Project Fund balance, if any, have been expended in accordance with Section 3.9 hereof, a copy of the annual audited financial statements of the Association for the preceding Fiscal Year, including a balance sheet and operating statements, audited by an Independent certified public accountant. Such financial statements shall be accompanied by a separate written statement from such Independent certified public accountant preparing such report that such Independent accountant has obtained no knowledge of any default by the Association in the fulfillment of any of the terms, covenants, provisions or conditions of this Agreement or if such accountant sha.ll have obtained knowledge of any such default the accountant shall disclose in such statement the default and the nature thereof, but such accountant shall not be liable directly or indirectly to any party for failure to obtain knowledge of any default. The . Association and the City agree and understand that compliance with this Section constitutes compliance with Section 7.01 of the Enabling Ordinance. SJBB6372 HPllO-4B 17 . Section 6. 3 . Financial Plan; Annual Reports. The Association agrees to furnish to the City, by no later than 120 days after the end of each Fiscal Year until the later of the Maturity Date and the date all excess Fee Revenues and Project Fund balance, if any t have been expended in accordance with Section 3.9 hereof: (a) an updated Financial Plan for the Property prepared by a Management Consultant acceptable to the City, in substantially the form of the Financial Plan dated March 15, 1995 and providing plans for capital improvements to the Property through the Maturity Date; (b) a written report by an Independent engineer describing the physical condition of the Property and the Housing Improvements as of the end of the preceding Fiscal Year, with detail sufficient to enable the City to evaluate compliance with the Financial Plan and the Association's obligations under this Agreement. Section 6.4. Records and Inspection. The Association shall maintain (i) copies of federalt statet municipal and other licenses and permits obtained by the Association relating to the operation of the Property and the Housing Improvements, (n) financial books and records reflecting the operations of the Property and the Housing Improvements, and (ill) all other documentst instruments, reports and records required by any provision of this Agreement or the Financial Plan or by law relating to the Property or the affairs of the Association. The City shall have the right to inspect all such materials, except any materials made private or confidential by federal or state law or regulation, and the Property at all reasonable times and to make such copies and extracts as it may desire. At the request of the City the . Association shall furnish to the City t at the Association's expense, a copy of any such materials which are required by the City in the performance of its duties under this Agreement, the Enabling Ordinance, the Fee Resolution or the Act. Section 6.5. Maintenance of Property. The Association agrees that so long as the Bonds are outstanding, the Association will keep or cause to be kept the Property and the Housing Improvements in good repair and good operating condition at its own cost. The Association shall make all repairs t replacements and improvements to the Property specified in the Financial Plan, as such plan may be amended in accordance with Section 6.3 hereof. Section 6. 6 . Covenant to Maintain Net Revenues Available for Debt Service. (a) In the event that, 10 business days before any Payment Date, the Net Revenues A vailable For Debt Service are less than 105 percent of the total principal and interest due on the Bonds on such Payment Date, the City will provide written notice to the Association of such fact and the amount of the deficiency. Within 10 days after receipt of such notice of deficiency in Net Revenues Available for Debt Service t the Association shall be liable for and shall pay the City such deficiency. Failure on the part of the City to provide the notice of the deficiency at the time specified herein shall not relieve the Association of its obligation to make the required payment 10 days after the actual notice of the deficiency is provided by the City to the Association. Failure on the part of the Association to make the required payment under this Section within 10 days after receipt of notice thereof shall entitle the City to exercise its remedies under this Agreement, notwithstanding any cure period provided in Article VII hereof. . (b) In the event that the Association makes any payment to the City under Section 6.6(a) and, 10 business days before any Payment Date thereafter the City determines that Net Revenues Available for Debt Service, excluding the amount of SJB86372 HPll0-48 18 ---------.. ----- -------- . all prior payments by the Association under Section 6. 6(a), are at least 105 percent of the total principal and interest due on the Bonds on such Payment Date, the City shall promptly return to the Association the amount of the prior payment, without interest thereon. Nothing in this Section 6.6(b) shall be construed to relieve the obligation of the Association to make any payment required under Section 6. 6(a) hereof. Section 6. 7 . Assignment of Association Assets. (a) As security for the Association's obligations under Section 6.6 hereof, the Association does hereby bargain, sell, assign and set over unto the City, all the dues, fees and assessments and other income of any type (the "Dues") owing to the Association from owners of Housing Units in the Property, together with all cash, investments and securities of any type held by the Association now or hereafter in any operating or reserve accounts (the "Accounts"). The Dues and Accounts are referred to collectively as the "Association Assets". This assignment shall constitute a perfected, absolute and present assignment, provided that the Association may, so long as no Event of Default with respect to Section 6.6 hereof occurs, collect and retain all Association Assets. The provisions of this Section 6.7 are intended to be a mere license in favor of the Association and a mere deferral of the City's exercise of its perfected, absolute and present rights hereunder, and shall not be construed to be a future assignment thereof. (b) The Association hereby covenants and warrants to the City that the Association has not executed any prior assignments of any Association Assets, nor . has it performed any act or executed any other instrument that might prevent the Association from operating under any of the terms and conditions of this assignment or that would limit the Association in such operation. (c) The Association hereby agrees that, so long as the Association's obligations under Section 6.6 hereof remain outstanding the Association will not, without the written consent of the City, make any other assignment, pledge or other disposition of any of the Association Assets, or consent in any assignment of same; and any such acts, if done without the written consent of the City, shall be null and void. (d) Upon the occurrence of an Event of Default with respect to Section 6.6 hereof, the City shall have the right to withdraw funds from, and liquidate any securities in any Accounts, and collect the Dues from the owners of Housing Units, and apply the same for deposit in the Bond Fund. This assignment shall be binding upon the occupants of Housing Units in the Property from the date of filing by the City in the office or offices where this Agreement is filed that an Event of Default under Section 6.6 hereof has occurred and is continuing and service of a copy of the notice upon the occupants of the Housing Units. The expenses, including any attorneyts fees, reasonably incurred pursuant to the powers herein contained shall be deemed to be immediately due and payable by the Association to the City and shall be secured hereby. The City shall not be liable to account to the Association for any action taken pursuant hereto other than to account for any Association Assets actually received by the City. . (e) The City shall not be obligated to perform or discharge, nor does it undertake to perform or discharge, any obligation, duty or liability under any agreement between the Association and owners of Housing Units in the Property, and SJBB6372 HPllO-4B 19 . the Association hereby agrees to defend and indemnify the City and hold it harmless for any and all liability, loss or damage which it mayor might incur under or by reason of this assignment and from any and all claims and demands whatsoever which may be asserted against it by reason of any alleged obligation or undertaking on its part to perform or discharge any of the terms or covenants contained in any agreement by and among the Association and the owners of Housing Units in the Property, except such claims and demands that arise out of the negligence or willful misconduct of the City, its officers, employees and agents. Should the City incur any such liability, loss or damage under or by reason of this assignment, or in the defense against any such claims or demands arising out of this assignment, the amount thereof, including costs, expenses and reasonable attorneys' fees, together with interest thereon at the rate of interest an the Bands t shall be secured hereby t and the Association shall reimburse the City therefore immediately upon demand. (f) In order to facilitate the Association obtaining short-term financing for the Housing Improvements before issuance of the Bonds t the City agrees to subordinate its rights under this Section during the period of such short-term financing, subject to such reasonable terms and conditions as the City and the short-term lender mutually agree in writing. Section 6. 8 . Association to Maintain its Existence; Conditions Under Which Exceptions Permitted. The Association agrees that, so long as the Bonds are outstanding, it will maintain its existence as a nonprofit corporation under the laws of Minnesota; will not dissolve or otherwise dispose of all or substantially aU of its assets; and will not consolidate with or merge into another corporation or permit one . or more other corporations to consolidate with or merge into it. Section 6. 9 . Prohibition Against Assignment of Ag-reement. The Association represents and agrees that prior to the Maturity Date the Association has not made or created and will not make or create or suffer to be made or created any total or partial sale, assignment, conveyance, or any trust or power, or transfer in any other mode or form of or with respect to the Association IS rights, interests or obligations under this Agreement or any part thereof, or any contract or agreement to do any of the same t without the prior written approval of the City. Section 6.10. Notice of Fee Upon Transfer of Housing Units. The Association agrees that it will use its best efforts to ensure that owners of each Housing Unit upon which a Fee is imposed under the Fee Resolution provide notice of the Fee to prospective buyers or transferees upon any sale or transfer of the Housing Unit. Such efforts by the Association shall include, but are not limited to ensuring that Housing Unit owners include a description of the Fee in each disclosure certificate provided to the purchaser as required under Minnesota Statutes, Section 515B .4-107 or any successor statute. . SJBB6372 HPllO-4B 20 . ARTICLE VII Events of Default Section 7.1. Events of Default Defined. The following shall be "Events of Default" under this Agreement and the term "Event of Default" shall mean, whenever it is used in this Agreement (unless the context otherwise provides), any failure by any party to observe or perform any other covenant, condition, obligation or agreement on its part to be observed or performed hereunder. Section 7 . 2 . Remedies on Default. Whenever any Event of Default referred to in Section 7.1 of this Agreement occurs, the non-defaulting party may exercise its rights under this Section 7. 2 after providing thirty days written notice to the defaulting party of the Event of Default, but only if the Event of Default has not been cured within said thirty days or, if the Event of Default is by its nature incurable within thirty days, the defaulting party does not provide assurances reasonably satisfactory to the non-defaulting party that the Event of Default will be cured and will be cured as soon as reasonably possible: (a) Suspend its performance under the Agreement until it receives assurances that the defaulting party will cure its default and continue its performance under the Agreement. (b) Take whatever action, including legal, equitable or administrative . action, which may appear necessary or desirable to collect any payments due under this Agreement, or to enforce performance and observance of any obligation, agreement, or covenant under this Agreement. Section 7. 3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the City or Association is intended to be exclusive of any other available remedy or remedies, 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 City 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 VII. Section 7.4. No Additional Waiver Implied by 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. . SJllB6372 HPllO-4B 21 . AR TICLE VIII Additional Provisions Section 8.1. Conflict of Interests; City Representatives Not Individually Liable. The City and the Association J to the best of their respective knowledge, represent and agree that no member, official, or employee of the City shall have any personal interest, direct or indirect J in the Agreement, nor shall any such member, official, or employee participate in any decision relating to the Agreement which affects his personal interests or the interests of any corporation, partnership, or association in which he is, directly or indirectly, interested. No member, official, or employee of the City shall be personally liable to the Association, or any successor in interest, in the event of any default or breach by the City or for any amount which may become due to the Association or successor or on any obligations under the terms of the Agreement. Section 8. 2. Equal Employment Opportunity. The Association, for itself and its successors and assigns, agrees that during the construction of the Housing Improvements provided for in the Agreement it will comply with all applicable federalJ state and local equal employment and non -discrimination laws and regulations. Section 8.3. Provisions Not Merged With Deed. None of the provisions of this Agreement are intended to or shall be merged by reason of any deed transferring . any interest in the Property and any such deed shall not be deemed to affect or impair the provisions and covenants of this Agreement. Section 8.4. 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 8.5 . Notices and Demands. Except as otherwise expressly provided in this Agreement, a notice, demand, or other communication 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 Association, is addressed to or delivered personally to the Association at 823 Old Settlers Trail, Hopkins, Minnesota 55343, Attention: Project Manager; and (b) in the case of the City, is addressed to or delivered personally to the City at 1010 First Street, Hopkins, Minnesota 55343, Attention: City Clerk. or at such other address with respect to either such party as that party may J from time to time, designate in writing and forward to the other as provided in this Section. Section 8. 6 . Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute one and the same instrument. . SJBB6372 HPllO-4B 22 . Section 8. 7 . Recording. The City shall record this Agreement and any amendments thereto with the Hennepin County Recorder or Registrar of Titles. The Association shall pay all costs for recording. Section 8.8 Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon the City and the Association and their respective successors) heirs and assigns. Section 8.9. Amendment. This Agreement may be amended only by written agreement of the parties hereto. . . SJB86372 BPllO-48 23 . . IN WITNESS WHEREOF, the City has caused this Agreement to be duly executed in its name and behalf and its seal to be hereunto duly affixed and the Association has caused this Agreement to be duly executed in its name and behalf on or as of the date first above written. CITY OF HOPKINS, MINNESOTA By Its Mayor By Its City Manager STATE OF MINNESOTA ) ) SS. COUNTY OF ) The foregoing instrument was acknowledged before me this _ day of , 1995 by and , the Mayor and City Manager, respectively, of the City of Hopkins, Minnesota, a municipal corporation, on behalf of the City. . Notary Public . SJB86372 HPllO-4B 24 -------------..---- .-- . . WESTBROOKE CONDOMINIUM ASSOCIA TION, d.b.a. MEADOW CREEK CONDOMINIUMS By Its By Its STATE OF MINNESOTA ) ) COUNTY OF ) The foregoing instrument was acknowledged before me this day of , 1995, by and , . the and of Westbrooke Condominium Association, d. b. a. Meadow Creek Condominiums, a Minnesota nonprofit corporation, on behalf of the corporation. Notary Public . BJIlB6372 EPll0-4B 25 . . SCHEDULE A PROPERTY Condominium No. 0246, Westbrooke Condominium, Hennepin County, Minnesota. . . SJB86372 HPllD-48 A-I . . SCHEDULE B HOUSING IMPROVEMENTS Rehabilitation of garages Rebuilding of trash and recycling areas Upgrading of building exteriors Replacement of lighting fixtures Installation of new signage Parking lot repairs Site Improvements . . SJl386372 HPllO-48 B-1 .. . SCHEDULE C DISBURSEMENT REQUISITION OF ASSOCIATION'S AUTHORIZED REPRESENTATIVE TO: City of Hopkins 1010 First Street Hopkins, MN 55343 DISBURSEMENT DIRECTION The undersigned Authorized Representative of Westbrooke Condominium Association, d. b.a Meadow Creek Condominiums, a Minnesota nonprofit corporation (the "Association"), hereby authorizes and requests you to disburse from the Project Fund held by you pursuant to the Development Agreement between the City of Hopkins, Minnesota and Westbrooke Condominium Association, d. b.a. Meadow Creek Condominiums, dated as of , 1995 (the "Agreement"), the following amount to the following person and for the following proper Housing Improvements . cost and purpose: 1. Amount: 2. Payee: 3. Purpose: aU as defined and provided in said Agreement. The undersigned further certifies that (i) none of the items for which payment is proposed to be made has formed the basis for any payment theretofore made from the Project Fund, and (ll) each item for which the payment is proposed to be made is or was necessary in connection with the Housing Improvements, and (ill) the amount of funds to remain on deposit in the Project Fund following this disbursement is currently estimated to be sufficient to pay all future costs of Housing Improvements. Dated: Association's Authorized Representative . SJBB6372 I1PllO-4B C-l --..----