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HomeMy WebLinkAboutOrdinance No. 2211-2007Suggested by: City Manager CITY OF KENAI ORDINANCE NO. 2211-2007 AN ORDINANCE OF THE COUNCIL OF THE CITY OF KENAI, ALASKA, AUTHORIZING THE SALE OF APPROXIMATELY 38.224 ACRES AT TRACT 1, BARON PARK, 2005 REPEAT IN THE CITY OF KENAI, ALASKA, AND SETTING FORTH THE PRICE AND OTHER TERMS AND CONDITIONS OF SALE. WHEREAS, the City of Kenai is the owner of approximately 38.224 acres at Tract 1, Baron Park, 2005 Replat in the City of Kenai, Alaska; and, WHEREAS, notwithstanding any other provisions of KMC 21.15, when it is found that encouragement of a new commercial enterprise would be beneficial to the City of Kenai, KMC 21.15.170 allows the sale of City land to be authorized by ordinance upon such terms as to price, conditions of conveyance and other conditions of sale; and, WHEREAS, construction of a 170,000 square-foot retail shopping facility would be beneficial to the City of Kenai; and, WHEREAS, Wal-Mart Stores, Inc. (Wal-Mart) wishes to purchase the property to build a retail shopping facility in Kenai of not less than 170,000 square feet; and, WHEREAS, the property is zoned Light Industrial and the intended use is a principal permitted use under the Kenai Zoning Code; and, WHEREAS, an appraisal by Derry & Associates has determined the fair market value to be $3,580,000; and, WHEREAS, Wal-Mart has agreed to pay fair market value ($3,580,000) for the property; and, WHEREAS, the proceeds from the sale will be placed in the Airport Land Sale Permanent Fund pursuant to KMC 7.30; and, WHEREAS, the property is not needed for a public purpose; and, WHEREAS, interest income from money placed in the Airport Land Sale Trust Fund can be used to support airport operations; and, WHEREAS, the purchase agreement provides that Wal-Mart will construct a retail shopping facility of at least 170,000 square feet within four years of the latter of the closing of the sale or issuance of a wetlands pernut; and, WHEREAS, the City shall have a right to repurchase the property if Wal-Mart fails to construct the required improvements within the allowed time period; and, Ordinance No. 2211-2006 Page 2 of 2 WHEREAS, the sale will be beneficial to the City of Kenai because: the proceeds will significantly increase the size of the Airport Land Sale Trust Fund which is used to support the operations of the Kenai Municipal Airport; it will significantly increase sales and property tax revenue to the City of Kenai; it will provide a significant number of jobs at the store and construction jobs during the project; it will stimulate business growth and customer traffic within Kenai; it will increase the commercial appeal of other land owned by the City of Kenai near the store; and, WHEREAS, the attached Purchase and Sale Agreement sets forth the price, conditions of conveyance, and other terms and conditions of the sale. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, that I) the property is not needed for a public purpose; and 2) the City Manager is authorized to execute the sale of'IYact I, Baron Park, 2005 Replat in the City of Kenai, as set forth in the attached Purchase and Sale Agreement. PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this seventh day of February, 2007. ~ ~ ~ ~ ~~/'t-/ PAT PORTER, MAYOR ATTEST: ~ ~~ J Carol L. Freas, City Clerk Approved by Finance: ~~ 4 Introduced: January 17, 2007 Adopted: February 7, 2007 Effective: March 7, 2007 Kenai. AK #4474 PURCHASE AGREEMENT (with Repurchase Right and Put Right) Date , 2007 (The "Effective Date" of this Agreement is the date on which this Agreement is fully executed by all parties hereto, as indicated by the latest date on the signature page(s) of this Agreement.) WAL-MART STORES, INC., a Delaware corporation ("Buyer") CITY OF KENAI, ALASKA, an Alaskan governmental entity ("Seller") Sale and Purchase. Pursuant to this Agreement, Seller shall sell and Buyer shall purchase the approximately 38.224 acre tract of land together with all improvements thereon, easements, water rights, and other rights appurtenant thereto and all of Seller's right, title, together with any and all development fees, impact fees, water, sewer or other utility tap, connection, meter or service fees or amounts which have been paid to any governmental authority in connection with any previous development of ±he property or any utility service provided to any improvement located on said land (collectively, the "Property") described in Exhibit A hereto. 2. Purchase Price. The purchase price for the Property (the "Purchase Price") shall be $3,580,000.00 (subject to recalculation if applicable under Sections 19 and 33, below). Buyer will pay $50,000.00 (the "Deposit") within ten days after the Effective Date to an interest bearing escrow account, with interest accruing to Buyer, with Stewart Title Guaranty Company ("Title Company"), Attention: Violet Gonzales, 2 North LaSalle Street, Suite 1400, Chicago, IL 60602, wherein Title Company intends to use Stewart Title of the Kenai Peninsula, Attention: Cassie McMahon, 610 Attla Way, Suite 4, Kenai, AK 99611, as its local title agent. Such interest shall be included in any refund of the Deposit hereunder. Any amounts required to be deposited by Buyer with the Escrow Agent pursuant to the terms of this Agreement may, at Buyer's election, be allocated pursuant to an irrevocable letter of credit existing in favor of Escrow Agent. The balance of the Purchase Price after application of any deposits made pursuant to this Agreement will be paid through the Escrow upon closing of this sale ("Closing") by certified check or Federal wire transfer. Escrow. This Agreement will be delivered as escrow instructions to establish an escrow (the "Escrow") with Title Company as escrowholder ("Escrow Agent"). The date of opening of escrow is the Effective Date of this Agreement. Escrow fees are subject to approval of Buyer and Seller. Not less than three business days prior to Closing, Seller shall execute the deed for the Property and deliver it to Title Company to hold until Closing. If there is any inconsistency between any escrow instructions and this Agreement, this Agreement shall control. 4. Survev. Buyer shall obtain a survey of the Property (the "Survey") suitable to Buyer and Title Company, containing the certification of the surveyor of the number of net square feet contained in the Property (the "Net Square Feet"). The Survey will show each exception contained in the Commitment, including any denominated as Schedule B exceptions, and its effect on the Property. 597501.11 12/27/2006 5. Title Review. The Title Company shall, at Seller's expense, provide Buyer with a commitment for an ALTA owner's title policy on the Property (the "Commitment"), and copies of all instruments shown by the Commitment as exceptions. At Closing Seller shall pay and release all amounts secured by mortgages, deeds of trust or other liens on the Property ("Monetary Liens") and terminate all existing tenancies or rights to possession of the Property ("Tenancy Rights"). Buyer shall have 30 days after receipt of the Commitment, Survey and copies of all documents constituting exceptions to title and survey (the "Review Period"), to review the Commitment and Survey. If Buyer objects to any matters in the Commitment or Survey, Buyer shall notify Seller in writing. Within 30 days of receipt of notice, Seller shall clear the title of the matters to which Buyer objects. If Buyer does not either accept or object to the Commitment and Survey within the Review Period, Buyer shall be in default and Seller may give Buyer notice pursuant to Section 9. Except for Monetary Liens, Tenancy Rights and matters to which Buyer objects, exceptions contained in the Commitment are the "Permitted Exceptions". If the Commitment is amended or supplemented after Buyer has submitted its objections to Seller, the same time periods, procedures and notices for objections and clearance of title shall apply to matters disclosed thereby. 6. Title Insurance and Deed. At Closing, Seller shall convey marketable fee simple title to the Property to Buyer, by general warranty deed in a form acceptable to Buyer, subject only to the Permitted Exceptions. The deed shall specifically list the Permitted Exceptions on an exhibit and shall not contain language such as or similar in context to "subject to all matters of record." Buyer shall obtain at Closing, at Seller's expense, a standard form ALTA Owner's Title Insurance Policy (the "Policy") issued by the Title Company, insuring marketable fee simple title to Buyer in the full amount of the Purchase Price and containing no exceptions or conditions other than the Permitted Exceptions. Buyer has the right to elect to obtain an ALTA extended coverage title insurance policy and such endorsements to the Policy as Buyer may require. Buyer will be responsible for the increase in premium between a standard form policy and an extended form policy and the costs of any endorsements other than endorsements obtained by Seller to cure Buyer's title objections as set forth in Section 5. 7. Risk of Loss and Condemnation. Until Closing, Seller has the risk of loss or damage to the Property. If any loss or damage occurs prior to Closing, Buyer may, at its option, either (i) cancel this Agreement and receive a refund of the Deposit, or (ii) accept the Property with the Purchase Price reduced by the cost of replacement or repair. If all or any part of the Property is condemned or any condemnation action or proceeding is commenced prior to Closing, Buyer may, at its option, either (a) cancel this Agreement and receive a refund of the Deposit, or (b) complete the purchase, with all condemnation proceeds and claims being assigned to Buyer. 8. Taxes and Assessments. Any real property taxes shall be prorated and adjusted on the basis of the actual days in the calendar year, Seller to have the last day, to the date of Closing. Taxes for all prior years and any taxes which become due or which are levied as a result of a change in the use of the Property in implementing Buyer's plan for the development of the Property shall be paid by Seller. Assessments, either general or special, for improvements completed prior to Closing, whether matured or unmatured, shall be paid in full by Seller (including all principal and interest). Any rollback taxes due as a result of the sale shall be paid by Seller. All other assessments shall be paid by Buyer. Seller will provide to Buyer such real property tax information for the Property as Buyer requests. Any Federal, state and local documentary or revenue stamps, transfer, sales and other taxes relating to the sale of the Property shall be paid by Seller at Closing and both parties agree to execute any tax forms necessary. 597501.11 12/27/2006 2 9. Notice of Default. In the event either party is in default of any provision hereof, including pursuant to Section 19, the non-defaulting party, as a condition precedent to its remedies, must give the defaulting party written notice of the default in strict accordance with the notice requirements of Section 18. The defaulting party shall have ten business days from receipt of such notice to cure the default. If the default is timely cured, this Agreement shall continue in full force and effect. If the default is not timely cured, the non-defaulting party may pursue its applicable remedies set forth in Sections 10 or 11. 10. Remedies of Seller. If Buyer defaults under this Agreement, Seller's sole and exclusive remedy shall be to retain the Deposit as liquidated damages, and cancel this Agreement with Buyer responsible for the payment of any escrow cancellation fees. The parties acknowledge that: (i) it would be impracticable to fix the actual damages suffered by Seller as a result of such default; and (ii} the amount of the liquidated damages represents a fair and reasonable compensation to Seller for such default. 11. Remedies of Buver. If the sale and purchase of the Property contemplated by this Agreement fails to close through no fault of Buyer, then Buyer may, at its option and as its sole and exclusive remedies, either: (a) cancel this Agreement, in which case the Buyer's Deposit shall be immediately refunded to Buyer, or (b) bring an action for specific performance of this Agreement, provided that, notwithstanding anything to the contrary contained herein, if, due to Seller's intentional or gross misconduct, the remedy of specific performance is (i) unavailable or (ii) impracticable because obtaining such remedy would increase the Purchase Price of the Property beyond the Purchase Price set forth herein or require Buyer to incur liabilities or obligations (excluding costs of enforcement) not contemplated pursuant to the terms of this Agreement (by way of example, to close would require Buyer to assume or pay off a mortgage or deed of trust that Seller placed on the Property that was not contemplated pursuant to the terms of this Agreement), then Seller shall be liable for all damages, whether in contract or tort or under any legal or equitable theory, including consequential damages, and for reasonable attorneys fees and costs. 12. Right of Entry and Inspection. At any time prior to Closing, at Buyer's sole expense, Buyer or its authorized agents may enter upon the Property for any lawful purpose, including making Inspections (as defined below) and erecting signs Buyer deems necessary. Buyer may select qualified professionals to make "Inspections" (including tests, borings, surveys, studies, inspections, investigations and interviews of persons familiar with the Property) concerning the Property, including but not limited to tests of structures, wells, septic tanks, underground storage tanks, soils, geologic hazards, utility lines and systems and environmental hazards. Buyer shall order the Inspections within 30 days of receipt of the Survey. Buyer shall keep the Property free of any liens, and repair any material physical damages to the Property arising from the Inspections. If any Inspections disclose matters unsatisfactory to Buyer, which Seller is unable or unwilling to correct at Seller's expense, Buyer may cancel this Agreement and receive a refund of the Deposit. 13. Brokeraoe Fees. Buyer shall be responsible for the payment of the brokerage fee or commission, payable only upon Closing, to Buyer's Broker, namely, Bond, Stephens, & Johnson, Inc. (Greg L. Johnson), in an amount equal to 6% of the first $1,500,000.00 of the Purchase Price plus 3% of the balance of the Purchase Price, but not to exceed $175,000.00 in the aggregate without specific written agreement from Buyer. The parties hereby acknowledge that Buyer's Broker represented and represents solely Buyer, and that previously disclosure was made of such representation. Both parties represent that no other broker is involved in this Agreement and each party indemnifies 597501.11 12/27/2006 3 the other against brokerage or commission claims arising out of the indemnifying party's actions. 14. Seller's Warranties. Seller makes the following representations and warranties which are true and accurate as of the Effective Date of this Agreement and as of Closing: (a) Seller has no knowledge of any violations of city, county, state, federal, building, land use, fire, health, safety, environmental, hazardous materials or other governmental or public agency codes, ordinances, regulations, or orders with respect to the Property, or any lands adjacent to the Property. (b) No litigation is pending, threatened or likely with respect to the Property, Seller's interest therein, or which would inhibit Buyer obtaining clear title to the Property. (c) Seller has no knowledge of any facts concerning the Property that would adversely affect the ability of Buyer to develop the Property as a retail facility. (d) The Property is not contaminated with, nor threatened with contamination from outside sources by, any chemical, material or substance to which exposure is prohibited, limited or regulated by any federal, state, county, local or regional authority or which is known to pose a hazard to health and safety and the Property has never been used for a landfill, dump site, underground improvements, storage of hazardous or regulated substances, or by a manufacturer of any product or for any other industrial use; provided that Seller discloses that an approximately 150' x 30' portion of the Property may contain construction debris located under a large dirt pile, consisting of stumps, concrete, and asphalt. (e) Except as disclosed to Buyer in writing, there are no unrecorded leases, arrangements, agreements, understandings, options, contracts, or rights of first refusal affecting or relating to the Property in any way. (f) Except to the extent this Agreement provides otherwise, the Property will remain in the condition existing as of the execution of this Agreement until Closing. (g) The individual signing this Agreement on behalf of Seller has the authority to bind the Seller to the agreements set forth herein. (h) Seller warrants that, as of the Effective Date of this Agreement and at Closing, municipal water and sanitary sewer mains are located in the rights-of-way of Marathon Road and the Kenai Spur Highway adjacent to the Property; provided that Buyer is solely responsible for the cost of connection to such utility mains and for any connections or hookup fees pursuant to Seller's ordinary and customary regulations and schedules applicable to its commercial customers. 15. Environmental Indemnity. Seller hereby indemnifies and agrees to defend and hold Buyer harmless from all claims, costs, liabilities, judgments or expenses resulting from any representations and warranties in Section 14(d) being untrue. Seller agrees, at its sole cost and expense, to perform all acts necessary to cause the Property to comply with all federal, state and local environmental laws, rules and regulations. Buyer may postpone Closing until Seller does so, or, postpone Closing and undertake actions necessary to fulfill Seller's obligations hereunder and receive a credit against the Purchase Price for the expenses incurred by Buyer in fulfilling Seller's duties hereunder. 597501.11 12/27/2006 16. Contingencies (a) Governmental Approvals. This Agreement is expressly conditioned on all approvals deemed necessary by Buyer for its use of the Property and for the construction of Buyer's planned facilities, subject only to conditions and stipulations acceptable to Buyer (the "Governmental Approvals"). Seller shall, in all ways, fully cooperate with Buyer in the pursuit of the Governmental Approvals including, without limitation, executing any application necessary to obtain each and every Governmental Approval. Buyer shall pursue the applications and processing to completion and Seller shall execute all necessary and appropriate instruments reasonably requested by Buyer which are related to the same. "Final Approval" of the Governmental Approvals shall be the date when: (i) all of the Governmental Approvals have been reviewed and finally approved by the appropriate governmental agencies, (ii) any ordinances with respect thereto have taken effect, (iii) the time has passed for appeal of all Governmental Approvals, (iv) no notice of referendum or initiative with respect to any Governmental Approval has been published or publicized and (v) any appeals or litigation with respect to (iii) or (iv) above have been prosecuted and resolved in a manner which is satisfactory to Buyer and is not subject to remand to Tower courts or governmental agencies. If the Final Approval has not occurred on or before 365 days from the Effective Date of this Agreement (the "Approval Deadline"), and if the parties have not otherwise mutually agreed to extend the Approval Deadline, Buyer may, at its option, either (a) terminate this Agreement, in which case this Agreement shall be of no further force and effect, and Title Company is irrevocably instructed to return to Buyer the Deposit, or (b) waive some or all parts of this contingency, (with or without imposition of further conditions not involving additional dollar expense by Seller) at Buyer's sole and absolute discretion, and proceed with the Closing. Notwithstanding anything to the contrary, as regards all required wetlands permits, approvals or determinations of non-jurisdiction from the United States Army Corps of Engineers or other applicable governmental entities as relates to the Property (the "Wetlands Approvals"), Seller agrees to be the applicant for, to diligently process to completion and to transfer/assign any such Wetlands Approvals to Buyer in a manner specified or otherwise acceptable to Buyer; provided that Buyer will reimburse Seller, upon written request with supporting documentation, for any reasonable costs, expenses and fees incurred by Seller in pursuing such Wetlands Approvals in accordance with this Section; provided such reimbursement amount shall not exceed $10,000 in the aggregate. Buyer agrees to cooperate and provide Seller with information and support sufficient to allow Seller to submit a Section 404 wetlands permit application seeking such Wetlands Approvals. (b) Buyer shall have a 365-day period from the Effective Date of this Agreement (the "Feasibility Period") to determine the feasibility of Buyer's planned development of the Property, provided that the parties may mutually agree to extend the Feasibility Period. At any time prior to the end of the Feasibility Period, the Buyer may, for any reason in its sole and absolute discretion, cancel this Agreement and receive a refund of the Deposit. 17. Information. Within ten days after the Effective Date of this Agreement, Seller shall - provide Buyer with copies of all surveys, site plans, studies, engineering reports, environmental studies, agreement pertaining to any water rights or supply, matters 597501.11 12/27/2006 F similar to the results of Inspections and other materials prepared for Seller, in Seller's possession or available to Seller relating to the Property and shall disclose in writing any other reports of which Seller is aware. If this Agreement is canceled, the information provided will be returned to Seller; otherwise, Buyer may retain the information. Seller shall disclose any material changes with respect to any information contained in this Agreement which occur prior to Closing. 18. Notices. All notices and communications required or permitted to be given hereunder shall be in writing and hand delivered or mailed by certified or registered mail, postage prepaid, or by Federal Express, Airborne Express, or similar overnight delivery service, addressed as follows: If to Seller: City of Kenai 210 Fidalgo Avenue Kenai, Alaska 99611-7794 Attention: Mr. Rick R. Koch City Manager If to Buyer: Wal-Mart Stores, Inc. 2001 S.E. 10`h Street Bentonville, Arkansas 72716-0550 Attention: Roger Thompson - 8703 Store #4474 With Copy To: Cary R. Graves City Attorney City of Kenai 210 Fidalgo Avenue Kenai, Alaska 99611 With Copy To: WaI-Mart Stores, Inc. 2001 S.E. 10`h Street Bentonville, Arkansas 72716-0550 Attention: John Okwubanego - 8313 Store #4474 Notice shall be deemed to have been given upon receipt or refusal 19. Closing. Closing shall occur within thirty (30) days of the expiration of the Approval Deadline, and provided all other conditions and contingencies set forth in this Agreement are satisfied, unless otherwise mutually agreed by the parties; provided that if Closing occurs (other than because of a default by Seller) after October 6, 2007, then the Purchase Price shall be recalculated as set forth in Section 33 below and in such event Closing shall be continued to allow such recalculation. Seller shall deliver to Buyer and Title Company all information and documents required of it for Closing at least ten days prior to Closing. If Seller fails to do so, Buyer may, at its option, delay Closing until ten days after all information and documents are delivered. Each party authorizes the Title Company to prepare the settlement statements for the Closing on HUD forms, show both the Buyer and Seller columns on a single settlement statement and disclose to the other party both the Buyer's and the Seller's half of any settlement statement, pre-audit or similar closing statement. Seller shall deliver possession of the Property to Buyer at Closing. 20. Closing Costs. Notwithstanding anything to the contrary contained herein, Closing costs shall be paid as follows: By Seller (Seller hereby authorizing Title Company to deduct the following expenses from the Seller's proceeds due at Closing): (a) Title insurance examination and standard owner's policy premium. (b) Expenses of placing title in proper condition. (c) Preparation of General Warranty Deed, affidavits and any other documents required to convey title. 597501.11 72/27!2006 F (d) Revenue stamps, transfer tax, documentary stamps or excise tax. (e) One-half the escrow fee, if any. By Buyer: (a) Recording fees. (b) One-half the escrow fee, if any. (c) Cost difference, if any, between extended owner's title policy and standard owner's title insurance policy and any endorsements for which Buyer is responsible pursuant to Section 6. (d) Brokerage or finder's fee or commission. 21. Time of Essence. Time is of the essence of this Agreement. 22. Entire Agreement. This Agreement contains the entire agreement between Seller and Buyer, and there are no other terms, conditions, promises, undertakings, statements or representations, express or implied, concerning the sale contemplated by this Agreement 23. Headings. The Section headings are for convenience of reference only and do not modify or restrict any provisions hereof and shall not be used to construe ar~y provisions. 24. Modifications and Waiver. This Agreement may be amended only by an instrument in writing signed by both Seller and Buyer. This Agreement may be terminated only in accordance with the terms of this Agreement or by an instrument in writing signed by both Seller and Buyer. No waiver of any of the provisions of this Agreement shall constitute a waiver of any other provision, nor shall any waiver be a continuing waiver. Except as expressly provided in this Agreement, no waiver shall be binding unless executed in writing by the party making the waiver. 25. Successors. This Agreement shall inure to the benefit of and bind the parties hereto and their respective executors, heirs, administrators, successors and assigns. Seller may not assign this Agreement without the prior written consent of Buyer. Buyer may not assign this Agreement without consent by Seller; provided that Buyer may assign, without consent of Seller, this Agreement to any business entity related to or under common control with Buyer, including any parent, subsidiary or affiliated company. 26. Internal Revenue Code. Seller agrees to comply with Section 1445 of the Internal Revenue Code and will complete and submit to Buyer the form attached as Exhibit B. 27. Attorney's Fees; Court Costs. In any action or proceeding arising out of this Agreement, and other than in the circumstance set forth in Section 11 above, each party shall bear its own attorney's fees, and the prevailing party shall be entitled to recover only court costs from the non-prevailing party incurred by such party in enforcing its rights hereunder. In the event of a legal dispute, the laws of the State where the Property is located shall prevail. 28. Survival. All warranties, indemnities, representations and covenants herein and the provisions of Section 8 shall survive Closing. 29. Dates of Performance. If any date for performance of any obligation hereunder falls on a Saturday, Sunday or nationally established holiday, the time for performance of such obligation shall be extended until the next business day following such date. 597501,11 12/27/2006 30. Enforceability. If any provision of this Agreement is held to be illegal, invalid or unenforceable, such provision shall be fully severable. This Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof. 31. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, but all of which, together, shall constitute one and the same instrument. 32. "Put" Right. If Buyer elects to close this transaction without the Wetlands Approvals, and Buyer does not thereafter after Closing obtain the issuance of final, nonappealed Wetlands Approvals, then, on or before one year after the Closing, Buyer may elect, in its sole discretion, to give a written notice to Seller (the "Put Notice") of Buyer's election to cause Seller to repurchase the Property by paying to Buyer a payment equal to the Purchase Price (the "Put"). In the event Buyer elects to exercise the Put, the transaction shall close within ninety (90) days of the Put Notice, and be conducted in the manner set forth in Section 34(e} below. The Put shall automatically terminate in the event Buyer does not provide Seller with timely notice of its intention to exercise the Put. The provision of this Section shall survive Closing. This Agreement shall not be recorded; however, a memorandum of the Put rights afforded under this Section shall be recorded against the Property at Closing in form and content set forth as Exhibit C hereto. 33. Purchase Price Recalculation. If Closing occurs (other than because of a default by Seller) after October 6, 2007 (the "Recalculation Date"), then the Purchase Price shall be recalculated to be the "Fair Market Value" of the Property as determined by the method set forth in the succeeding paragraphs in this Section. The "Fair Market Value" of the Property for purposes of the Purchase Price under this Section shall be equal to the fair market rate for similar commercial property in the City of Kenai, Alaska (the "Relevant Area"). Seller shall give Buyer notice of Seller's estimation of Fair Market Value not later than thirty (30) days after the Recalculation Date, as evidenced and supported by the written opinion of a qualified and licensed MAI real estate appraiser (selected and paid for by Seller) familiar with the Relevant Area and who would qualify as an expert witness. If Buyer disagrees with such estimate, it shall advise Seller in writing thereof within thirty (30) days of Buyer's receipt of such estimate. If there is a disagreement on such estimation, the parties shall promptly meet to attempt to resolve their differences. If the differences as to Fair Market Value are not resolved within thirty (30) days of the date of Buyer's notice of disagreement of the initial estimate of Fair Market Value, then the parties shall submit the matter to arbitration in accordance with this Section. Notwithstanding anything to the contrary herein, Closing shall be continued to allow such determination of Fair Market Value. If the parties are unable to reach agreement on Fair Market Value during the period specified in the immediately preceding paragraph, then within ten (10) days thereafter either party may advise the other in writing of the name and address of its arbitrator. The arbitrator shall be qualified as an MAI real estate appraiser familiar with commercial property values in the Relevant Area who would qualify as an expert witness. Within ten (10) days after receipt of such notice from the initiating party (the "Instigator") designating its arbitrator, the other party (the "Recipient") shall give notice to Instigator, specifying the name and address of the person designated by Recipient to act as arbitrator on its behalf who shall be similarly qualified. The duty of the arbitrator(s) shall be to determine the Fair Market Value. The two (2) arbitrators so chosen shall meet within ten (10) days after the second arbitrator is appointed and, if within ten (10) days after such first meeting the two arbitrators shall be unable to agree promptly upon a 597501.11 7 2/27/2006 determination of Fair Market Value, they, themselves, shall appoint a third arbitrator, who shall be a competent and impartial person with qualifications similar to those required of the first two arbitrators. Where the issue cannot be resolved by agreement between the two arbitrators selected by Seller and Buyer or settlement between the parties during the course of arbitration, the issue shall be resolved by the three arbitrators in accordance with the following procedure. Each of the two arbitrators originally selected by each of the parties shall state in writing his or her determination of the Fair Market Value supported by the reasons therefore with counterpart copies to each party (the "Determinations"). The arbitrators shall arrange for a simultaneous exchange of such Determinations. The role of the third arbitrator shall be to independently select which of the two Determinations most closely approximates his or her determination of Fair Market Value and the Determination so chosen shall be the Fair Market Value. The third arbitrator shall have no right to propose a Fair Market Value but must select one or the other Determination reached by one of the two original arbitrators. Any decision in which the arbitrator appointed by Seller and the arbitrator appointed by Buyer concur shall be binding and conclusive upon the parties. Each party shall pay the fee and expenses of its respective arbitrator and both shall share equally the fee and expenses of the third arbitrator. Each party shall bear its own attorneys' fees and expenses in connection with the determination of Fair Market Value. The arbitrators shall have the right to consult experts and competent authorities with factual information or evidence pertaining to a determination of Fair Market Value. The arbitrators shall render their decision and award in writing with counterpart copies to each party. The arbitrators shall have no power to modify the provisions of this Agreement. 34. Repurchase Riaht {a) In the event Buyer fails to either complete or to be diligently pursuing the completion of the construction of at least a 170,000 square foot retail shopping facility the Property on the date which is four (4) years from the later of (i) the date of Closing or (ii) the issuance of final, nonappealed Wetlands Approvals (the "Completion Deadline"), subject to the other provisions of this Section including (f) and (g) below, Seller shall have the one time right (the "Repurchase Right") to repurchase the Property including any improvements by paying to Buyer a payment (the "Repurchase Payment") equal to the sum of the Purchase Price less the costs of removing or clearing liens affecting the Property created by Buyer after the Closing. (b) Seller shall give Buyer written notice of its intention to exercise said right of repurchase (the "Repurchase Notice") within thirty (30) days of the Completion Deadline. In the event Seller elects to exercise the Repurchase Right, the transaction shall close within ninety (90) days of the Repurchase Notice. The Repurchase Right shall automatically terminate in the event Seller does not provide Buyer with timely notice of its intention to exercise the Repurchase Right or in the event that Seller does not close the transaction within ninety (90) days after the effective date of the Repurchase Notice. (c) The Repurchase Payment shall be calculated as of the date of Repurchase Notice. Within ten (10) business days after receipt of the Repurchase Notice, Buyer shall provide Seller with a written notice of the amount of the Repurchase Payment. Upon receipt of such notice Seller shall have fifteen (15) days to rescind its election to repurchase the Property pursuant to this Section and, upon such recession, Seller's rights under this Section shall be of no further force or effect. 597501.11 12/27/2006 9 (d) Seller's right to repurchase contained in this Section constitutes Seller's sole and exclusive remedy for any failure on the part of Buyer to complete construction on the Property. As used herein, completion of the retail shopping facility shall be deemed to have occurred once Buyer's retail shopping facility has opened for business for one day on the Property. Seller shall pay the Repurchase Payment into escrow within ninety (90) days of the Repurchase Notice. In the event the Seller fails to timely tender the Repurchase Payment, the Repurchase Right shall automatically terminate and be of no further force and effect, and Seller shall have no right to repurchase the Property under this Section. (e) In the event that the Seller complies with the provisions of this Section, Buyer shall convey title to the Property to the Seller by Special Warranty Deed in the same state as is evidenced by the title insurance policy issued in favor of Buyer pursuant to the terms hereof, subject to such reasonable easements, dedications and rights-of-way which may be required in Buyer's discretion to make beneficial use of the Property. In connection with the closing of the sale of the Property by Buyer to Seller, Buyer shall pay the expense and cost of all local documentary or revenue stamps, transfer, sale or other taxes, if any, related to the sale of the Property and for a standard form ALTA owner's title policy issued by the Title Company insuring marketable fee simple title to Seller, subject only to the matters described in the foregoing sentence. (f) Notwithstanding anything to the contrary contained herein, the date by which Buyer is required to complete construction pursuant to this Section shall be extended if Buyer's performance thereof is prevented by virtue of (i) Buyer's inability to obtain necessary governmental approvals to build, open or operate on the Property in accordance with Buyer's plans therefor, (ii) a pending referendum, (iii) by the order of a court resulting from any litigation brought by a third party to prevent or delay Buyer's development, construction or operation, or (iv) a Force Majeure (as defined below). Such extension shall be for a period equal to the actual length of such delay, together with any time reasonably required by Buyer to remobilize for construction as a result of such delay. (g) For purposes of this Agreement, "Force Majeure" shall mean any event beyond the control of Buyer, its contractors, or any entity controlled by Buyer that delays the performance of any obligation of Buyer under this Agreement despite Buyer's commercially reasonable efforts to fulfill the obligation, including without limitation by reason of acts of God, strikes, lockouts, labor troubles, civil disorder, inability to procure materials, restrictive governmental laws or regulations or other cause without fault and beyond the control of Buyer (financial inability excepted). (h) It is expressly agreed that no agreement between Buyer and Seller shall be construed to contain a covenant, either express or implied on the part of Buyer to open or operate a retail shopping facility on the Property. Seller recognizes and agrees that Buyer may, at Buyer's sole discretion, choose to open a retail store on the Property or elect not to do so; and Seller hereby waives any legal action for damages or for equitable relief which might be available to Seller because of any failure of Buyer to open a retail shopping facility on the Property. The provisions of this Section shall survive Closing. This Agreement shall not be recorded; however, a memorandum of the Repurchase Rights afforded under this Section shall be recorded against the Property at Closing in form and content set forth as Exhibit C hereto. 597501.11 12/27/2006 1 ~ IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. WAL-MART STORES, INC., a Delaware corporation By Its Assistant Vice President Date CITY OF KENAI, ALASKA By Its City Manager Date 597501.11 12/27/2006 11 EXHIBIT A TO PURCHASE AGREEMENT (Legal Description of the Property) Approximately 38.224 acres of land located near the intersection of Marathon Road and Kenai Spur Highway, in the City o9 Kenai, Alaska, and also described as Tract 1, Baron Park 2005 Replat (Tax Parcel No. 043-361-07). EXHIBIT A TO PURCHASE AGREEMENT 597501.11 12/27/2006 12 EXHIBIT B TO PURCHASE AGREEMENT (Form of Non-Foreign Affidavit) ENTITY TRANSFEROR Personally appeared before me the undersigned officer, duly authorized to administer oaths, ,who being duly sworn according to law, deposes and says on oath as follows: 1. The undersigned is presently the City of Kenai, an Alaskan governmental entity (the "City"). 2. The undersigned is familiar with the affairs of the City and has personal knowledge of the facts sworn to in this Affidavit, and is authorized on behalf of the City to make this Affidavit. 3. The City is the owner of that certain property (the "Property") described on Exhibit "A" attached hereto and by this reference made a part hereof and the City has caused to be executed and delivered that certain deed, of even date herewith, conveying the Property to WaI-Mart Stores, Inc., a Delaware corporation ("Purchaser"). 4. Section 1445 of the Internal Revenue Code provides that a purchaser of a U.S. real property interest must withhold tax if the seller is a foreign person. For U.S. tax purposes (including section 1445), the owner of a disregarded entity (which has legal title to a U.S. real property interest under local law) will be the transferor of the property and not the disregarded entity. To inform the Purchaser that the withholding of tax is not required upon the disposition of the Property by the City, the undersigned hereby certifies the following on behalf of the Company: (a) The City is not a disregarded entity as defined in Section 1.1445- 2(b)(2)(iii); (b) The City's U.S. Employer Identification Number is (c) The Company's office address is 210 Fidalgo Avenue, Kenai, Alaska 99611-7794, Attention: Mr. Rick R. Koch, City Manager. 5. The City understands that this certification may be disclosed to the Internal Revenue Service by the Purchaser and that any false statement contained herein could be punished by fine, imprisonment, or both. 6. Under penalties of perjury, I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that 1 have authority to sign this document on behalf of the City. 597501.11 12/27/2006 EXHIBIT B TO PURCHASE AGREEMENT 13 GIVEN under my hand and seal this day of , 2007. CITY OF KENAI, ALASKA By Its City Manager Sworn to and subscribed in the presence of: Notary Public My Commission Expires: [NOTARIAL SEAL] (SEAL) EXHIBIT B TO PURCHASE AGREEMENT 597501.11 12/27/2006 14 EXHIBIT C TO PURCHASE AGREEMENT When Recorded Return To: MEMORANDUM OF PUT and REPURCHASE RIGHTS [Kenai AK #4474] This Memorandum of Put and Repurchase Rights (the "Memorandum"), effective this _ day of , 2007, is made by and between the CITY OF KENAI, ALASKA, an Alaska governmental entity (the "City"), whose address is City of Kenai, 210 Fidalgo Avenue, Kneai, Alaska 99611, Att: Cary R. Graves, City Attorney, WAL-MART STORES, INC., a Delaware corporation ("Wal-Mart"), whose address is Wal-Mart Stores, Inc., Store # 4474, 2001 S.E. 10`" Street, Bentonville, Arkansas, 72716-0550, Att: John Okwubanego (#8313). The parties hereby give notice as follows: 1. This Memorandum is made with respect to that certain land located in the City of Kenai, Alaska, and legally described on Exhibit A attached hereto and incorporated herein by reference (the "Property"}. 2. Wal-Mart is the owner of the Property, having acquired the Property from the City pursuant to that Purchase Agreement (with Repurchase Right and Put Right) dated 2007, by and between the City and Wal-Mart (the "Purchase Agreement"). 3. In the Purchase Agreement, the City and Wal-Mart agreed, among other things, to certain rights with respect to the Property which survive Closing (as defined in the Purchase Agreement), namely (i) a "'Put' Right" in favor of Wal-Mart pursuant to Section 32 of the Purchase Agreement in which Wal-Mart may elect, in its sole discretion, to cause the City to repurchase the Property on the terms and conditions set forth in such Section of the Purchase Agreement (the "Put Right"), and (ii) a "Repurchase Right" in favor of the City pursuant to Section 34 of the Purchase Agreement in which the City has the one time right to repurchase the Property from Wal-Mart on the terms and conditions set forth in such Section of the Purchase Agreement (the "Repurchase Right"). 4. The parties hereto give notice of the Put Right and the Repurchase Right as regards the Property as such exist on the terms and conditions set forth in such relevant Sections of the Purchase Agreement, which relevant Sections of the Purchase Agreement are incorporated herein by reference as if fully set forth herein. A copy of such relevant Sections of the Purchase Agreement are available for inspection with either the City or Wal-Mart at the addresses hereinabove set forth. THE CITY OF KENAI, ALASKA, an Alaska governmental entity By Its City Manager 597501.11 12/27/2006 EXHIBIT C TO PURCHASE AGREEMENT 15 WAL-MART STORES, INC., a Delaware corporation By: Its Assistant Vice President State of Alaska Judicial District The foregoing instrument was acknowledged before me this day of 2007, by ,the of the City of Kenai, Alaska, an Alaska governmental entity, on behalf of the governmental entity. (Seal and Expiration Date) Notary Public State of Arkansas County of Benton The foregoing instrument was acknowledged before me this day of 2007, by , an Assistant Vice President of Wal-Mart Stores, Inc., a Delaware corporation, on behalf of the corporation. (Seal and Expiration Date) Notary Public 597501.11 12/27/2006 EXHIBIT C TO PURCHASE AGREEMENT 16 EXHIBIT A (t_egal Description of the Property) Approximately 38.224 acres of land located near the intersection of Marathon Road and Kenai Spur Highway, in the City of Kenai, Alaska, and also described as Tract 1, Baron Park 2005 Replay (Tax Parcel No. 043-361-07). ss~soi.ii iziz~izoos EXHIBIT C TO PURCHASE AGREEMENT 17 402 Overland, Kenai, Alaska 99611 phone: 907-283-7989 fax: 283-7183 email: info@kenaichamber.org www. kena ich am ber. org January 26, 2007 Rick Koch, City Manager City of Kenai 210 Fidalgo Avenue Kenai, Alaska 99611 Dear Rick L e ~. ~.,, ._. ,. -. _...r~ F Jti6@ G w ..,. dr.___.______._.._ .~ The Kenai Chamber of Commerce supports the sale of land owned by the City of Kenai to Wal, Mart for the purpose of constructhig a new Super- Center. The Kenai Chamber of Commerce would like to see the terms of the sale include a fair, market-driven price for the land and recourse if Wai- Mart fails to develop the property. If you have questions or would like ad- ditional comments ~,Cxom the Kenai Chamber of Commerce please let the know. Sin y, ~~ 7aso Carroll, President 2047 President Jason Carroll, 1st National Bank Past President 1)r. Ilennis Swarner; Kenai Vision Center Vice President Steve Hansen, Tesoro Secretary Treasurer Amanda Fe¢gin, Dunkin & Bush 2007 Directors Milt Allen, Udelhoven Penny Furnish, Stewart Title Scott Grifftth, XTO Energy GeueRaybun~>, SBS Durainey Rawls, Duraineq Cranes 7anie Odgers, Executive Director %aren Craig, Assistant m 907-283-7989 Fax:907-283-7183 email: infiaQa kenaichamber.org www.keriaicham ber.org rti~ 402 Overland Kenai, Alaska 99611 ElVI Al~TDU TO: Mayor Porter and the Kenai City Council FROM: C ~ Cary R. Graves, City Attorney DATE: February 2, X007 BI;: Summaay of Terms and Conditions of Wal-Mart Land Sale As with the pending Lowe's sale, I thought it would be helpful to the Council and general public if I provided a summary of the terms and conditions of the proposed land sale Co Wal-Ulart. ICMC 21.15.170 allows the sale of city land, not withstanding any other provisions of the an~port land code, by negotiated sale when it finds "that encouragement of a new commercial or industrial enterprise would be beneficial to the City of Kenai." The price, terms and conditions of the sale are to be set forth in the ordinance authorizing the sale. They are included in the purchase agreement attached to the ordinance. Initially, Wai-Mart requested to Lease the property. It later changed its request from a lease to a sale because they wanted certainty in the purchase price. The lease application is governed by the city code in effect prior to the recent airport land code amendments. The prior city code allowed Wal-Mart to purchase the property for fair market value after completion of their development plan (i.c. the fair market value in two yearsj. Wal-Mart is not interested in doing the project if it cannot purchase the property. The uncertainty of what the purchase price will be two years from now is a major disincentive for Wal-Mart's development of the project. Wal- Mart did not want to commit millions of dollars to construction of a store when it did not know what the purchase price of the land would be in two years. Wal-Mart believes the future price of land in the area will rise due in large parC because it will have built a store on the property acrd, therefore, spurred local business growth and real estate demand. It would be penalized financially (in terms of future ptiu-chase price) for investing millions of dollars in Kenai. When Wal-Mart initially expressed interest in leasing the property it was valued at $3,200,000. The original appraisal was dated September 26, 2005. Since the original appraisal expired after one year a new appraisal was done. The new appraisal set the price at $3,580,000. The following is a summary of terms and conditions of the sale as contained in the Purchase Agreement: 1. Price. The appraisal by Derry and Associates sets the fair market value of the property at $3,580,000. Wal-Mart has agreed to pay the fair market value of the property. If closing occurs after October 6, 2007 (the expiration date of the appraisal) the property will be re- appraised and the new purchase price will apply. The money from the sale will go into the Airport Land Permanent Fund. The corpus of the fund cannot be spent but interest from it can be used to support the airport. 2. Wal-Mart will deposit $50,000 into escrow within ten days after the effective date of the Purchase Agreement. 3. Closing shall occur within thirty (30) days of the expiration of the "Approval Deadline" unless otherwise mutually agreed by the parties. The "Approval Deadline" is 365 days from the effective date of the purchase agreement. Wal-Mart can back out of the sale without penalty at any time prior to the approval deadline. The lengthy approval deadline is needed by Wal-Mart because of time required to get Department of Transportation (DOT) highway permits, design, engineering and cost analysis and to allow the time for the City to apply for a Corps of Engineers permit for any wetlands on the property. 4. Wal-Mart agrees to complete or be diligently pursuing completion of at least a 170,000 square-foot retail shopping facility on the premises within four years from the later of the closing or the decision on any wetlands permit application. 5. If Wal-Mart fails to comply with the construction requirement, the City may exercise a repruchase option and buy the property including any improvements back. The re- purchaseprice would be the purchase price paid by Wal-Mart. If repurchase occurred, interest earned on the purchase price from the period between closing and repurchase would be retained by the city for the airport. Assuming a 5% return on the money it would generate about $179,000 per year for the airport. Additionally, Wal-Marl would pay property tax for the land prior to the repurchase that would go to the general fund. 6. The purchase agreement also provides fora "put right." That provides that if Wal-Mart closes the sale and pays for the property while the wetlands permit is pending and the wetlands permiC is thereafter denied, Wal-Mal may within one year of the closing exercise the put right. This provision would require the city to repurchase the property at the same price Wai-Mart had paid for the property. This contingency was needed because Wal-Mart wants to close on the sale before the current appraisal expires, but it is reluctant to invest $3,580,000 without knowing whether a wetlands permit will be issued for the property. This way it can close on the sale and if a permit is denied then make a decision whether to continue with the project without a permit. As above, the city would have beneficial use of the money between the closing and the put right re-purchase date. Please note that the administration does not believe a wetlands permit will be denied. Nor does denial of the permit mean the project is over. Our understanding is that if a permit is denied Wal-Mart will evaluate whether to continue with the project on a modified basis. 7. Wal-Mart will pay the real estate commission to Greg Johnson in an amount not to exceed $175,000. The City will not pay any commission in this sale. As noted above, this memorandum is intended to be a general sunnnary of the Purchase Agreement. Please let me know if you have any questions regarding the proposed sale.