Contract for Private Development/Kalispell Garage Apartment PartnersCONTRACT FOR PRIVATE DEVELOPMENT
between
CITY OF KALISPELL, MONTANA
and
KALISPELL GARAGE APARTMENT PARTNERS, LLC
Dated as of , 2022
CONTRACT FOR PRIVATE DEVELOPMENT
THIS CONTRACT FOR PRIVATE DEVELOPMENT (this "Agreement") is made as of the
day of 2022, by and between the CITY OF KALISPELL, MONTANA, a Montana
municipal corporation (the "City"), with offices at 201 Is` Ave E, Kalispell, MT 59901, and Kalispell
Garage Apartment Partners, LLC, (the "Purchaser") of 208 1s` Ave. E., Kalispell, MT 59901.
RECITALS
WHEREAS, on July 3, 2017, and pursuant to MCA 76-1-604, the Kalispell City Council passed
Resolution No. 5821 amending the Kalispell Growth Policy which, among other things, called for the
development of a Downtown Plan as a key project to have a tangible positive impact on the citizens of
Kalispell; and
WHEREAS, on December 4, 2017, and pursuant to MCA 76-1-604, the Kalispell City Council
passed Resolution No. 5846A, thereby amending the Kalispell Growth Policy with the adoption of a
Downtown Plan; and
WHEREAS, on December 18, 2018, and pursuant to the Montana Urban Renewal Act, MCA Title
7, Chapter 15, Part 42, the Kalispell City Council, after making all necessary investigation and establishing
the appropriate findings of fact, passed Ordinance No 1816 thereby creating the Downtown Kalispell Urban
Renewal District; and
WHEREAS, on February 4, 2019, and pursuant to Montana Code Annotated, Title 7, Chapter 15,
Part 42, as amended (the "TIFAct'), the Kalispell City Council passed Ordinance No. 1820 establishing
a tax increment financing district as an overlay to the Downtown Kalispell Urban Renewal District, naming
it the Downtown Kalispell Urban Renewal Tax Increment Financing District (hereinafter referred to as the
"District") and set January 1, 2020, as the base taxable year for the District; and
,wL
WHEREAS, on the 2 G day of My, 2022, the City issued a Request for Proposals consistent with
the purposes set forth in the Downtown Plan to eliminate blight and increase the tax base within the District
that will utilize the City owned real property that was in use for surface parking situated in Section 18
Township 28 North, Range 21 West, P.M.M. Flathead County, Montana and located at the corner of I`
Street West and Is' Avenue West and more particularly described as Lots 17, 18, 19, 20, 21, 22, 23, and 24
of Block 46 of Kalispell Original Townsite Map of record in the Office of Clerk and Recorder for Flathead
County, also known as the "Eagles Lot", for the purposes of providing a privately owned, maintained and
managed parking structure containing a minimum of 242 parking spaces, street level retail spaces, as well
as residential units; and
WHEREAS, on the L day of sf' , 2022, the Kalispell City Council accepted the
recommendation of the selection committee o approve the proposal submitted by Montana Hotel
Development Partners, LLC for the development of a privately owned, maintained and managed public
parking structure 242 parking spaces, street level retail spaces, as well as residential units to be located
upon the above -described real property and directed that a development agreement be negotiated between
the parties; and
WHEREAS, the City is entering into this Contract for Private Development with Purchaser for the
above stated purposes; and
WHEREAS, pursuant to Section 7-15-4288 of the TIF Act, eligible costs to be paid by the City
include assemblage of land for redevelopment by private enterprise, including sale by the local government
of real property it owns at its fair value; and
WHEREAS, tax increment derived from the District may be utilized for any improvements
authorized by Title 7, chapter 12, parts 41 through 45; Title 7, chapter 13, parts 42 and 43; and Title 7,
chapter 14, part 47 as well as for reimbursement of the costs for improvements authorized to be made
pursuant to the TIF Act; and
WHEREAS, it is the purpose of this Contract for Private Development to set forth the respective
commitments, rights, and obligations of the parties in which a) the Purchaser acquires the real property
currently owned by the City as above described and upon which; b) the Purchaser designs and constructs a
parking structure with street level storefront spaces as well as residential units situated above the parking
structure; c) for which eligible portions of the costs shall be reimbursed to the Purchaser by the City from
Available Tax Increment derived from the District; and
WHEREAS, the Purchaser shall further commit to leasing a minimum of 90 parking spaces within
the above -described public parking structure to serve the parking needs of the Project of a hotel/hospitality
complex for a period of no less than 50 years, at the initial rate of a to be determined fee, with the amount
to be reestablished on every fifth anniversary thereafter set at the average monthly price for public parking
spaces within public parking structures located in Missoula, Bozeman, and Whitefish; and
WHEREAS, the City has determined that the application of Available Tax Increment contemplated
herein and the fulfillment generally of this Agreement, are in the vital and best interests of the City and the
health, safety, morals, and welfare of its residents, and in accord with the public purposes and provisions
of applicable State of Montana laws and local laws and requirements.
OW, THEREFORE, in consideration of the mutual obligations contained in this Agreement, the
parties agree as follows:
ARTICLE I
Definitions; Exhibits; Interpretation
Section 1.1. Definitions. The following terms shall have the meanings given in this Agreement,
unless a different meaning clearly appears from the context:
"Affiliate" means with respect to the Puchaser (a) any corporation, partnership, limited liability
company or other business entity or person controlling, controlled by or under common control with the
Purchaser, and (b) any successor to such party by merger, acquisition, reorganization, or similar transaction
involving all or substantially all the assets of such party (or such Affiliate). For the purpose hereof the
words "controlling", "controlled by" and "under common control with" shall mean, with respect to any
corporation, partnership, limited liability company or other business entity, the ownership of fifty percent
(50%) or more of the voting interests in such entity possession, directly or indirectly, of the power to direct
or cause the direction of management policies of such entity, whether ownership of voting securities or by
contract or otherwise.
"Agreement" means this Contract for Development, as the same may be from time to time
modified, amended, or supplemented.
"City" means the City of Kalispell, Montana.
"City Representative" means the City Manager or other City official, or staff so designated in
writing by the City Manager.
"Construction Plans" means the plans, specifications, drawings and related documents on the
construction work to be performed by the Purchaser on the Development Property, including the Minimum
Improvements and the related site improvements, which (a) shall be as detailed as the plans, specifications,
drawings and related documents which are submitted to the appropriate building officials of the City, and
(b) shall include at least the following: (1) site plan; (2) foundation plan; (3) floor plan for each floor; (4)
cross sections of each (length and width); (5) elevations (all sides); (6) landscape plan; and (7) such other
plans or supplements to the foregoing plans as the City may reasonably request to allow it to ascertain the
nature and quality of the proposed construction work.
assigns.
"County" means the County of Flathead, Montana, its successors and assigns.
"Developer" means Montana Hotel Development Partners, LLC, or its permitted successors and
"Development Property" means the real property described in Exhibit A of this Agreement.
"District" means the Downtown Kalispell Urban Development Tax Increment Financing District,
established by the City Council of the City pursuant to the TIF Ordinance.
"Environmental Laws and Regulations" means and includes the Federal Comprehensive
Environmental Compensation Response and Liability Act ("CERCLA" or the "Federal Superfund Act") as
amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. §§ 9601
et seq.; the Federal Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. §§ 6901 et
seq.; the Clean Water Act, 33 U.S.C. § 1321 et seq.; and the Clean Air Act, 42 U.S.C. §§ 7401 et seq., all
as the same may be from time to time amended, and any other federal, state, county, municipal, local or
other statute, code, law, ordinance, regulation, requirement or rule which may relate to or deal with human
health or the environment including without limitation all land use, zoning, and stormwater control
regulations as well as all regulations promulgated by a regulatory body pursuant to any statute, code, law,
ordinance, regulation, requirement or rule.
"Event of Default" means an action by the Purchaser listed in Article VIII of this Agreement.
"Maturity Date" shall be the date of the issuance of a Certificate of Occupancy for the Minimum
Improvements defined in the Development Agreement for the public off-street parking structure at 1" Street
West and I" Avenue West described above in the Recitals.
"Minimum Improvements" means the construction on the Development Property on Lots 17, 18,
19, 20, 21, 22, 23, and 24 of Block 46 of Kalispell Original Townsite Map of record in the Office of Clerk
and Recorder for Flathead County, including related site improvements, according to the set of plans
approved by the City, all in compliance with the requirements pertaining thereto as set forth in this
Agreement.
"Mortgage" means any mortgage made by the Purchaser which is secured, in whole or in part, with
the Development Property and which is a permitted encumbrance pursuant to the provisions of Article VII
of this Agreement.
"Project" means the Development Property as improved by the Minimum Improvements.
"State" means the State of Montana.
"TIF Act" means Montana Code Annotated, Title 7, Chapter 15, Part 42, as amended.
"TIF Ordinance" means Ordinance No. 1820, adopted by the City Council on February 4, 2019.
"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, prolonged adverse
weather or acts of God, fire or other casualty to the Minimum 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 (except those attributable to
government -imposed moratoria) in the obtaining of permits or governmental approvals necessary to enable
construction of the Minimum Improvements by the dates such construction is required under Section 4.4
of this Agreement.
Section 1.2. Exhibits. The following exhibits are attached to and by reference made a part of this
Agreement:
Exhibit A Legal Description of Development Property
ARTICLE II
Representations and Warranties
Section 2.1. Representations by the City. The City makes the following representations and
warranties as the basis for its covenants herein:
(a) The City is a municipal corporation duly organized and existing under the laws of the State.
Under the provisions of the TIF Act, the City has the power to enter into this Agreement and carry out its
obligations hereunder.
(b) The City owns an unencumbered fee interest in the Development Property.
(c) There is no litigation pending or, to the actual knowledge of the City, threatened against
the City questioning the validity or enforceability of this Agreement or the due execution and delivery of
this Agreement by the City.
(d) To the actual knowledge of the undersigned officials of the City, the execution and delivery
of this Agreement does not materially 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 Purchaser. The Purchaser makes the following
representations and warranties as the basis for its covenants herein:
(a) The Purchaser is (i) a Limited Liability Company, duly organized and in good standing
under the laws of the State, (ii) not in violation of any provisions of its articles of organization or
membership agreement, and (iii) duly authorized to transact business within the State.
(b) The Purchaser has the power to enter into this Agreement and has duly authorized the
execution, delivery, and performance of this Agreement by proper action of its members.
(c) In order to realize the fair market value of the Development Property which is being
transferred to the Purchaser, the City proposes to pay $_530,000 into the City's General Fund from
the Available Tax Increment generated by the Eagle Lot Development. Following this payment, the
Available Tax Increment generated by the Parking Structure will be used to pay for the security pledge for
the off-street public parking structure.
(d) The Purchaser has received no notice or communication from any local, State or federal
official that the activities of the Purchaser 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, if any). The Purchaser
is not aware of any 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.
(d) 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 Purchaser is now a party or by which it is bound, or constitutes a default under any of the foregoing,
which default or breach might prevent the Purchaser from performing its obligations under this Agreement.
(e) The Purchaser will secure adequate financing for construction of the Minimum
Improvements and will provide adequate evidence to the City of said financing for the construction of the
Minimum Improvements.
(t) The Purchaser will construct and maintain the Minimum Improvements while it is under
its control in accordance with the terms of this Agreement and all local, State, and federal laws and
regulations including, but not limited to, environmental, zoning, building code and public health laws and
regulations.
(g) The Purchaser will construct the Minimum Improvements as provided herein in accordance
with all local, State, and federal energy -conservation laws and regulations.
(h) The Purchaser 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 Minimum Improvements may be lawfully
constructed.
ARTICLE III
Financing of Minimum Improvements: Available Tax Increment
Section 3.1. Status of the Development Property. The City currently owns the fee interest title to
the Development Property, and the City shall convey the Development Property to the Purchaser by means
of a Warranty Deed, upon which Purchaser proposes improvements to be constructed consisting of a multi -
deck public parking structure (managed according to the lease between the Purchaser and the City of
Kalispell), storefronts on the street level and multifamily housing constructed above the parking decks. The
Purchaser shall develop plans for the Minimum Improvements according to the City's direction and present
them to the City for its approval.
Section 3.2. Construction Financing Note and Application of Available Tax Increment. The
Purchaser shall privately finance the construction of the Minimum Improvements. In an addendum to this
Agreement, the parties shall agree upon 1) the construction plans for the Minimum Improvements, 2) the
costs and cost breakdowns for the construction of the Minimum Improvements, 3) the form of the security
agreement in which the City shall pledge Available Tax Increment to secure the Purchaser's payments on
the Note, and any other guarantee that may be required of the City for the financing and construction of the
Minimum Improvements
(a) 100 % of the tax increment generated by the Hotel project at 31 and Main and the Eagle Lot
Development will be available to reimburse the Purchaser for costs of the Minimum
Improvements of the public parking structure that are required for the Hotel development at 3`d
and Main (including displaced parking) on an annual basis.
(b) Tax increment generated by other properties in the Downtown Tax Increment district will be
used to reimburse the Purchaser for costs associated with additional parking in the structure as
requested by the City of Kalispell.
(b)(i) Reimbursement payments will be made over a 12-year period as tax increment
becomes available beginning January 1, of the I" year after completion. The City, at its
discretion may pay a portion, or all, of this obligation in advance.
a. Example: if 202 spaces are required for the project, under 3.2.(a). 40 parking spaces
are being added to the structure under 3.2.(b). Thus 84% of the minimum
improvements will be reimbursed by tax increment developed by the Hotel Eagle Lot
Development, and 16% of the minimum improvements will be funded through
additional available tax increment generated by properties in the district.
(c) Tax Increment generated by the Eagle Lot Development will be available to reimburse the
City of Kalispell general fund for the appraised price of ($530,000), Following this
reimbursement, increment generated by the parking structure will be available to reimburse the
Purchaser for costs of the Minimum Improvements of the parking structure (as identified in
Section 3.2 (a) and (b).
Section 3.3. Records. The City and its representatives shall have the right at all reasonable times
after reasonable notice to inspect, examine all books and records of the Purchaser relating to the Project.
Such records shall be kept and maintained by the Purchaser until the Maturity Date. The Purchaser shall
also use its best efforts to cause its contractor or contractors, all sub -contractors and their agents and lenders
to make their books and records relating to the Project available to the City, upon reasonable notice, for
inspection, examination and audit.
Section 3.4. Financing Contingency. This agreement shall be contingent upon Purchaser's ability
to obtain financing for the Minimum Improvements, and if Purchaser is unable to obtain financing by
January 1, 2023, this Agreement shall be terminated, of no further force and effect, and the parties shall
have no further obligation to each other. The Parties, by mutual agreement, may extend this date.
Section 3.5. Environmental Conditions. (a) The Purchaser acknowledges that the City makes no
representations or warranties as to the condition of the soils on the Development Property or the fitness of
the Development Property for construction of the Minimum Improvements or any other purpose for which
the Purchaser may make use of such Development Property, and that the assistance provided to the
Purchaser under this Agreement neither implies any responsibility by the City for any contamination of the
Development Property or poor soil conditions nor imposes any obligation on the City to participate in any
cleanup of the Development Property or correction of any soil problems.
(b) Without limiting its obligations under this Agreement, the Purchaser further agrees that it
will indemnify, defend, and hold harmless the City and its governing body members, officers, and
employees from any claims or actions arising out of the presence, if any, of hazardous wastes or pollutants
existing on or in the Development Property, unless and to the extent that such hazardous wastes or pollutants
are present as a result of the actions or omissions of the indemnitees. Nothing in this Section shall be
construed to limit or affect any limitations on liability of the City under any State or federal law.
ARTICLE IV
Construction of Minimum Improvements
Section 4.1. Construction of Minimum Improvements. The Purchaser agrees that it will construct
the Minimum Improvements on the Development Property in substantial accordance with this Agreement
and its Addendums and, at all times prior to the issuance of the Certificate of Occupancy, will preserve and
keep the Minimum Improvements or cause such improvements to be preserved and kept with the
appurtenances and every part and parcel thereof, in good repair and condition.
Section 4.2. Contractor's Bonds. Purchaser's Construction Agreement with the general contractor
shall include the following requirement: "The General Contractor shall purchase and maintain performance
and payment bonds each in an amount at least equal to the total Contractor's Compensation as security for
the faithful performance and payment of all of Contractor's obligations under this Agreement. All bonds
shall be obtained from a surety that is duly licensed and authorized to transact business within the state of
Montana and to issue bonds for the limits so required. All bonds shall remain in effect throughout the life
of this Agreement and for a minimum of one (1) year following the date of expiration of Contractor's
warranties. A certified copy of the agent's authority to act must accompany all bonds signed by an agent.
If the surety on any bond furnished by Contractor is declared bankrupt or becomes insolvent or its right to
do business within the state of Montana is terminated, Contractor shall promptly notify City and shall within
twenty (20) days after the event giving rise to such notification, provide another bond and surety, both of
which shall comply with all requirements set forth herein."
Section 4.3. Construction Plans. (a) Generally. Before commencing construction of the Minimum
Improvements, the Purchaser shall submit the Construction Plans to the City. The City will approve the
Construction Plans in writing if: (i) the Construction Plans conform to the terms and conditions of this
Agreement; (ii) the Construction Plans conform to all applicable federal, State and local laws, ordinances,
rules and regulations; (iii) the Construction Plans are adequate to provide for construction of the Minimum
Improvements; (iv) the Construction Plans do not provide for expenditures in excess of the funds available
to the Purchaser from all sources for construction of the Minimum Improvements; and (v) no Event of
Default has occurred under this Agreement.
(b) Changes to the Construction Plans. If the Purchaser desires to make significant changes
in the Construction Plans, in the discretion of the City Representative, after their approval by the City, the
Purchaser shall submit the proposed changes to the City's building officials for their approval.
Section 4.4. Commencement and Completion of Construction. Subject to Unavoidable Delays, the
Purchaser shall commence construction of the Minimum Improvements no later than March 1, 2023 . Subject
to Unavoidable Delays, the Purchaser shall have substantially completed the construction of the Minimum
Improvements no later than March 31, 2025. The signatories by mutual agreement, may extend these dates.
All work with respect to the Minimum Improvements to be constructed or provided by the Purchaser on the
Development Property shall be in conformity with the Construction Plans. The Purchaser shall make such
reports to the City regarding construction of the Minimum Improvements as the City deems necessary or
helpful in order to monitor progress on construction of the Minimum Improvements.
Section 4.5. Utilities. The Purchaser shall not interfere with, or construct any improvements over, any
public street or utility easement without the prior written approval of the City. All connections to public utility
lines and facilities shall be subject to approval of the City and any private utility company involved. The
Purchaser at its own expense shall replace any public facilities or utilities damaged during construction of the
Projects or the Public Parking Unit by the Purchaser or its agents or by others acting on behalf of or under their
direction or control of the Purchaser.
Section 4.6. Permits and Compliance With Laws. The Purchaser will obtain, in a timely manner, all
required permits, licenses and approvals, and will meet all requirements of all local, state and federal laws, rules
and regulations which must be obtained or met in connection with the acquisition and construction of the
Minimum Improvements. Without limiting the foregoing, the Purchaser will request and seek to obtain from
the City or other appropriate governmental authority all necessary land use, zoning, and building permits. The
Purchaser will comply in all material respects with all Environmental Laws and Regulations applicable to the
construction, acquisition, and operation of the Minimum Improvements, will obtain any and all necessary
environmental reviews, licenses or clearances under, and will comply in all material respects with,
Environmental Laws and Regulations. In addition, the Purchaser shall comply fully with all applicable state
and federal laws, regulations, and municipal ordinances related to worker safety including but not limited to
the Occupational Safety and Health Act (OSHA), the safety rules, codes, and provisions of the Montana Safety
Act in Title 50, Chapter 71, MCA, all applicable City, County, and State building and electrical codes, and the
Americans with Disabilities Act.
Section 4.7. Non -Discrimination and Equal Pay Affirmation. The Purchaser agrees to require its
contractor(s) to be in compliance with Title 49 Human Rights, Montana Code Annotated, regarding activities
related to the Minimum Improvements. The Purchaser agrees that in its contracts with its contractors the
Purchaser's contractor will be required to require its subcontractors to comply with Title 49 Human Rights,
Montana Code Annotated, regarding activities related to the Minimum Improvements. The Purchaser agrees
to provide copies of all such contracts upon request by the City.
Section 4.8. Worker's Compensation Insurance. The Purchaser shall provide in its construction
contracts related to the Minimum Improvements with all of its respective contractors that such contractors are
to be covered by a Worker's Compensation insurance program with the State, a private insurance carrier, or an
approved self-insurance plan in accordance with State law.
Section 4.9. Certificate of Occupancy. (a) After completion of the Minimum Improvements in
accordance with the Construction Plans and all terms of this Agreement, the City will furnish the Purchaser
with a Certificate of Occupancy, a form of which is attached hereto as Exhibit B.
(b) The Certificate of Occupancy will be in recordable form in the proper County office for
the recordation of instruments pertaining to the Development Property. If the City refuses or fails to provide
the Certificate in accordance with the provisions of this Section 4.10, the City shall, within 30 days after
written request by the Purchaser, provide the Purchaser with a written statement, indicating in adequate
detail in what respects the Purchaser has failed to complete the Minimum Improvements in accordance with
the provisions of the Agreement, or is otherwise in default, and what measures or acts will be necessary, in
the opinion of the City, for the Purchaser to take or perform in order to obtain such Certificate.
(c) The construction of the Minimum Improvements shall be deemed to be complete at such
time as the Purchaser is legally entitled to the issuance of a certificate of occupancy by the City with respect
thereto.
ARTICLE V
Insurance
Section 5.1. Insurance. (a) The Purchaser agrees to provide and maintain at all times during the
process of constructing the Minimum Improvements and, from time to time at the request of the City,
furnish the City with proof of payment of premiums on:
(i) Builder's risk insurance, written on the so-called "Builder's Risk -- Completed
Value Basis," in an amount equal to one hundred percent (100%) of the insurable value of the
Minimum Improvements at the date of completion, and with coverage available in nonreporting
form on the so called "all risk" form of policy;
(ii) 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
(iii) Workers' compensation insurance, with statutory coverage.
The policies of insurance required pursuant to clauses (i) and (ii) above shall be placed with financially
sound and reputable insurers licensed to transact business in the State. The policy of insurance delivered
pursuant to clause (i) above shall contain an agreement of the insurer to give not less than thirty (30) days'
advance written notice to the City in the event of cancellation of such policy or change affecting the
coverage thereunder.
(b) Prior to the Maturity Date, the Purchaser 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 Minimum Improvements under a
policy or policies covering such risks as are ordinarily insured against by similar businesses,
including (without limiting the generality of the foregoing) fire, extended coverage, vandalism and
malicious mischief, heating system explosion, water damage, demolition cost, debris removal,
collapse and flood, in an amount not less than the full insurable replacement value of the Minimum
Improvements. No policy of insurance shall be so written that the proceeds thereof will produce
less than the minimum coverage required by the preceding sentence, by reason of coinsurance
provisions or otherwise, without the prior consent thereto in writing by the City. The term "full
insurable replacement value" shall mean the actual replacement cost of the Minimum
Improvements and shall be determined from time to time at the request of the City, but not more
frequently than once every three years, by an insurance consultant or insurer, selected and paid for
by the Purchaser and approved by the City; and
(ii) Such other insurance, including worker's compensation insurance respecting all
employees of the Purchaser, in such amount as is customarily carried by like organizations engaged
in like activities of comparable size and liability exposure.
In lieu of any of the foregoing, the Purchaser may provide evidence to the City that the Purchaser has self -
insured for the amounts and terms satisfying this Section.
10
(c) The parties agree that all the provisions set forth in this Article shall terminate upon the
Maturity Date.
Section 5.2. Notification,• Repair. Reconstruction and Restoration. Until the Maturity Date the
Purchaser agrees to notify the City immediately in the case of damage exceeding $50,000 in amount to, or
destruction of, the Minimum Improvements, or any portion thereof resulting from fire or other casualty.
Subject to the rights of lenders, in such event the Purchaser shall forthwith repair, reconstruct, and restore
the Minimum 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 Purchaser will apply the net proceeds of any insurance relating to such damage received
by the Purchaser to the payment or reimbursement of the costs thereof.
The Purchaser shall complete the repair, reconstruction, and restoration of the Minimum
Improvements, whether or not the net proceeds of insurance received by the Purchaser 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 Purchaser.
Section 5.3. Subordination. Notwithstanding anything to the contrary herein, the rights of the City
with respect to the receipt and application of any insurance proceeds shall, in all respects, be subordinate
and subject to the rights of any holder under a Mortgage allowed pursuant to Article VII of this Agreement.
ARTICLE VI
Financing
Section 6.1. Generally. (a) Before commencement of construction of the Minimum Improvements,
the Purchaser shall submit to the City Representative evidence of one or more commitments for financing
which, together with committed equity for such construction, is sufficient for payment of costs of
construction of the Minimum Improvements
(b) If the City Representative finds that the financing is sufficiently committed and adequate
in amount to pay the costs specified in paragraph (a) then the City shall notify the Purchaser in writing of
its approval. Such approval shall not be unreasonably withheld and either approval or rejection shall be
given within ten (10) days from the date when the City is provided the evidence of financing. A failure by
the City to respond to such evidence of financing shall be deemed to constitute an approval hereunder. If
the City rejects the evidence of financing as inadequate, it shall do so in writing specifying the basis for the
rejection. In any event the Purchaser shall submit adequate evidence of financing to the City within ten
(10) days after such rejection.
Section 6.2 Creation of Contingency Account. The Purchaser shall create and fund a
contingency account within its construction budget that shall be sufficiently funded to address the
contingencies of providing the funding to pay the costs of demolishing the improvements and bringing the
surface parking lot back to its functional purpose in the event the project fails, for whatever reason. The
City shall be designated as the secured party for these funds. The determination of whether to demolish
the improvements, in the event of such a crisis, shall be made, within a reasonable period of time, by
agreement between the City, the other secured parties in the project, and the Purchaser or its assigns or
successors. Upon issuance of a Certificate of Occupancy, the City shall release any interest in the
contingency account.
Section 6.3 Determination of Continency Requirements and Reporting. The Purchaser shall
employ the appropriate professionals to determine the amount of funds necessary to hold within the
contingency account and shall provide a report of this account to the Office of the City Manager at its initial
funding, including the amount and the methodology employed to determine the amount. Thereafter, upon
any changes in the balance of the account, reports shall be made to the City Manager's Office, setting forth
the balance of the account along with the reasons therefore.
ARTICLE VII
Prohibitions Against Assignment; Indemnification
Section 7.1. Representation as to Development. The Purchaser represents and agrees that its
undertakings pursuant to this Agreement are and will be for the purpose of development of the Development
Property and not for speculation in land holding.
Section 7.2. Prohibition Against Purchaser's Transfer of Property and Assignment of Agreement.
The Purchaser represents and agrees that prior to issuance of the Certificate of Occupancy for the Minimum
Improvements:
(a) Except only by way of security for, and only for the purpose of obtaining financing necessary
to enable the Purchaser or any successor in interest to the Development Property, or any part thereof to
perform its obligations with respect to making, owning and/or operating the Minimum Improvements under
this Agreement, and any other purpose authorized by this Agreement, the Purchaser 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 lease, or any trust or power, or transfer in any other mode or form of or with respect to this Agreement
or the Development Property or any part thereof or any interest therein, or any contract or agreement to do
any of the same (collectively, a "Transfer"), without the prior written approval of the City, unless the
Purchaser remains liable and bound by this Agreement, in which event the City's approval is not required.
In the absence of a specific written agreement by the City to the contrary, no such transfer or approval by
the City thereof shall be deemed to relieve the Purchaser or any other party bound in any way by this
Agreement or otherwise with respect to the construction of the Minimum Improvements from any of its
obligations with respect thereto. The provisions of this Section 7.2(a) shall not limit transfers to Affiliates
of the Purchaser.
(b) In the event the Purchaser, upon Transfer or assignment of the Development Property or
any portion thereof, seeks to be released from its obligations under this Agreement as to the portions of the
Development Property that are transferred or assigned, the City shall be entitled to require, except as
otherwise provided in this Agreement, as conditions to any such release that:
(i) Any proposed transferee shall have the qualifications and financial responsibility,
in the reasonable judgment of the City, necessary and adequate to fulfill the obligations undertaken
in this Agreement by the Purchaser as to the portion of the Minimum Improvements or the
Development Property to be transferred.
(ii) Any proposed transferee, by instrument in writing satisfactory to the City and in
form recordable among the land records of the County, shall, for itself and its successors and
assigns, and expressly for the benefit of the City, have expressly assumed all of the obligations of
the Purchaser under this Agreement as to the portion of the Minimum Improvements or
Development Property to be transferred and agreed to be subject to all the conditions and
restrictions to which the Purchaser is subject as to such portion; provided, however, that the fact
that any transferee of, or any other successor in interest whatsoever to, the Minimum Improvements
or Development Property, or any part thereof, shall not, for whatever reason, have assumed such
obligations or so agreed, and shall not (unless and only to the extent otherwise specifically provided
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in this Agreement or agreed to in writing by the City) deprive the City of any rights or remedies or
controls with respect to the Development Property or any part thereof or the construction of the
Minimum Improvements; it being the intent of the parties as expressed in this Agreement that (to
the fullest extent permitted at law and in equity and excepting only in the manner and to the extent
specifically provided otherwise in this Agreement) no transfer of, or change with respect to,
ownership in the Minimum Improvements or Development Property or any part thereof, or any
interest therein, however consummated or occurring, and whether voluntary or involuntary, shall
operate, legally or practically, to deprive or limit the City of or with respect to any rights or remedies
or controls provided in or resulting from this Agreement with respect to the Minimum
Improvements or Development Property that the City would have had, had there been no such
transfer. In the absence of specific written agreement by the City to the contrary, no transfer or
approval by the City thereof shall be deemed to relieve the Purchaser, or any other party bound in
any way by this Agreement or otherwise with respect to the construction of the Minimum
Improvements, from any of its obligations with respect thereto.
(iii) Any and all instruments and other documents involved in effecting the Transfer of
any interest in this Agreement or the Minimum Improvements or the Development Property
governed by this Article shall be in a form reasonably satisfactory to the City.
(c) The City's approval of any Transfer shall not be unreasonably withheld. Any notice of
rejection of a Transfer by the City shall contain detailed reasons for the rejection. In the event the foregoing
conditions are satisfied, the Purchaser shall be released from its obligations under this Agreement as to the
portion of the Minimum Improvements or the Development Property that is transferred, assigned or
otherwise conveyed.
(d) After issuance of the Certificate of Occupancy for the Minimum Improvements, the
Purchaser may transfer or assign any portion of the Development Property or the Purchaser's interest in
this Agreement without the prior written consent of the City, provided that prior to the Maturity Date the
transferee or assignee is bound by all of the Purchaser's obligations hereunder. Prior to any such Transfer
or assignment, the Purchaser shall submit to the City written evidence of any such Transfer or assignment,
including the transferee or assignee's express assumption of the Purchaser's obligations under this
Agreement. If the Purchaser fails to provide such evidence of Transfer and assumption, the Purchaser shall
remain bound by all of its obligations under this Agreement.
Section 7.3. Release and Indemnification Covenants. (a) The City and the governing body
members, officers, agents, servants and employees thereof (the "Indemnified City Parties"), except for any
willful misrepresentation or any willful or wanton misconduct or negligence of the Indemnified Parties,
shall not be liable for and the Purchaser shall indemnify and hold harmless the Indemnified City Parties
against any loss or damage to property or any injury to or death of any person occurring at or about or
resulting from any defect in the Development Property or any improvements constructed thereon, but only
to the extent that such defects were caused or committed during the periods that the Purchaser owned the
Development Property prior to and up to the issuance of the Certificate of Occupancy.
(b) Except for any willful misrepresentation or any willful or wanton misconduct or negligence
of the Indemnified City Parties, and except for any breach by any of the Indemnified City Parties of their
obligations under this Agreement, the Purchaser agrees to protect and defend the Indemnified City Parties,
now and forever, and further agrees to hold the aforesaid harmless from any claim, demand, suit, action or
other proceeding whatsoever by any person or entity whatsoever arising or purportedly arising from this
Agreement, or the transactions contemplated hereby or the acquisition, construction, installation,
13
ownership, maintenance and operation of the Development Property or any improvements constructed upon
the Development Property.
(c) Except for any willful misrepresentation or any willful or wanton misconduct or negligence
of the Indemnified City Parties, the Indemnified City Parties shall not be liable for any damage or injury to
the persons or property of the Purchaser or its Affiliates, officers, agents, servants or employees or any
other person who may be about the Development Property or any improvements constructed thereon.
(d) 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 such
entities and not of any governing body member, officer, agent, servant, or employee of such entities in the
individual capacity thereof.
Section 7.4 Right of Holder to Cure Defaults. City agrees to give notice to the Holder of any
Mortgage of any event of default by Purchaser under this Agreement, specifying the nature of such default,
and thereupon the Holder shall have the right, but not the obligation, to cure such default, and City shall
not exercise its remedies by reason of such default until it has afforded the Holder thirty (30) days after
Holder's receipt of such notice to cure such default and a reasonable period of time in addition thereto (i) if
the circumstances are such that said default cannot reasonably be cured within said thirty (30) day period
and Holder has commenced and is diligently pursuing such cure, or (ii) during and after any litigation action
including a foreclosure, bankruptcy, possessory action or a combination thereof.
ARTICLE VIII
Events of Default
Section 8.1. 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, any one or
more of the following events:
(a) failure by the Purchaser or an Affiliate to observe or perform any covenant, condition,
obligation or agreement on its part to be observed or performed under this Agreement;
(b) commencement by the holder of any Mortgage on the Development Property or any
improvements thereon, or any portion thereof, of foreclosure proceedings as a result of default under the
applicable Mortgage documents for the Purchaser or an Affiliate;
(c) if the Purchaser or an Affiliate shall:
(i) file any petition in bankruptcy or for any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under the United
States Bankruptcy Act or under any similar federal or State law; or
(ii) make an assignment for benefit of its creditors; or
(iii) admit in writing its inability to pay its debts generally as they become due; or
(iv) be adjudicated a bankrupt or insolvent
(d) failure by the City to observe or perform any material covenant, condition, obligation or
agreement or its part to be observed or performed under this Agreement.
14
Section 8.2. Remedies on Default. Whenever any Event of Default referred to in Section 8.1 of
this Agreement occurs, the non -defaulting party may exercise any of the following rights under this Section
after providing thirty (30) days written notice to the other of the Event of Default, but only if the Event of
Default has not been cured within said thirty (30) days or, if the Event of Default is by its nature incurable
within thirty (30) days, the defaulting party does not, within such thirty (30) day period, provide assurances
reasonably satisfactory to the party providing notice of default that the Event of Default will be cured and
will be cured as soon as reasonably possible:
(a) suspend its performance under this Agreement until it receives reasonably satisfactory
assurances that the defaulting party will cure its default and continue its performance under this Agreement;
(b) cancel and rescind or terminate its obligations under this Agreement or any portion thereof,
including without limitation the obligation to apply and allocate Available Tax Increment pursuant to
Section 3.3 hereof as to any portion of the Project owned by the Purchaser, or an Affiliate, as of the date of
the notice of default;
(c) withhold the Certificate of Occupancy with regard to the uncompleted portion; or
(d) if the default occurs prior to completion of any portion of the Minimum Improvements and
the Developer is unable to complete the project or obtain an Assignee acceptable to the City to complete
the project, the Developer's ownership interest in the property and improvements thereon shall be
transferred to the City and the City may exercise its option to take over management of the Project to insure
completion of the Minimum Improvements, or if default occurs with 25% or less of the Minimum
Improvements completed, to abandon the Project, provided that such abandonment is consented to by any
Holder of a Mortgage securing financing of the Project; or,
(e) 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 of the defaulting party under this Agreement.
City agrees not to suspend its obligations under the Agreement or terminate or rescind the
Agreement as a result of the Holder of a Mortgage initiating or continuing foreclosure proceedings, upon
the Holder taking possession of the Development Property or following a sale of the Development Property
by the Holder or as a result of any foreclosure proceedings so long as the Holder and/or subsequent
purchaser agrees to assume all of the obligations of the Purchaser under the Agreement.
Section 8.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to any party in
this Agreement 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.
Section 8.4. No Additional Waiver Implied by One Waiver. In the event any agreement contained
in this Agreement should be breached by any party and thereafter waived by another 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.
15
ARTICLE IX
Additional Provisions
Section 9.1. Conflicts of Interest• Representatives Not Individually Liable. The City and the
Purchaser, to the best of their knowledge, represent and agree that no member, official, or employee of the
City shall have any personal interest, direct or indirect, in this Agreement, nor shall any such member,
official, or employee participate in any decision relating to this Agreement which affects his or her personal
interests or the interests of any corporation, partnership, or association in which he or she is, directly or
indirectly, interested. No member, official, or employee of the City shall be personally liable to the
Purchaser, any Affiliate, 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 Purchaser or successor or on any obligations under the terms of
the Agreement.
Section 9.2. Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon
the City, the Purchaser, any Affiliates, and their respective successors and assigns.
Section 9.3. Severability. In the event any provision of this Agreement shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
Section 9.4. Equal Employment Opportunity. The Purchaser agrees, for itself and any Affiliate,
successors, and assigns, that during the term of this Agreement it will comply with all applicable federal,
State and local equal employment and non-discrimination laws, regulations, and ordinances as they relate
to the development of the Project.
Section 9.5. Covenant to Pay Property Taxes and Assessments. The Purchaser agrees for itself, its
Affiliates, successors and assigns, in addition to the State law to pay real estate taxes and special
assessments, that it is also obligated by reason of this Agreement to pay before delinquency all real estate
taxes and Assessments against the Development Property during any period while the Purchaser holds title
to any portion of the Development Property. The Purchaser acknowledges that this obligation creates a
contractual right on behalf of the City to sue the Purchaser or its successors and assigns to collect delinquent
real estate taxes, Assessments, and any penalties or interest thereon and to pay over the same as a tax
payment to the County Auditor. In any such suit, the City shall also be entitled to recover its costs, expenses
and reasonable attorney fees.
Section 9.6. 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 Development Property
and any such deed shall not be deemed to affect or impair the provisions and covenants of this Agreement.
Section 9.7. Titles of Articles and Sections. Any titles of the several parts, Articles, and Sections
of this Agreement are inserted for convenience of reference only and shall be disregarded in construing or
interpreting any of its provisions.
Section 9.8. Notices and Demands. Except as otherwise expressly provided in this Agreement, a
notice, demand, or other communication under this 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 to the following addresses:
16
To the Purchaser: KALISPELL GARAGE APARTMENT PARTNERS, LLC
208 Is' Ave. E.
Kalispell, MT 59901
Attention: Robert Watson
To the City: City of Kalispell
201 1 st Ave. E.
PO Box 1997
Kalispell, Montana 59903-1997
Attention: City Manager
The City or the Purchaser may, by notice given hereunder, designate any further or different addresses to
which subsequent notices, requests, or other communications shall be sent.
Section 9.7. Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall constitute one and the same instrument.
Section 9.8. Applicable Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Montana.
Section 9.9. Recording. The City may record this Agreement and any amendments thereto with
the County Recorder. The Purchaser shall pay all costs for recording this Agreement.
Section 9.10. Gender, Etc. Words of any gender include the correlative words of the other gender.
The terms "hereof," "hereby," "herein," "hereto," "hereunder," "hereinafter," and similar terms refer to this
Agreement; and the term "hereafter" means after, and the term "heretofore" means before, the date on which
this Agreement was fully executed.
Section 9.11. Entire Agreement. This Agreement constitutes the entire agreement between the
parties pertaining to its subject matter and it supersedes all prior contemporaneous agreements,
representations, and understandings of the parties pertaining to the subject matter of this Agreement. This
Agreement may be modified, amended, terminated, or waived, in whole or in part, only by a writing signed
by all the parties.
17
IN WITNESS WHEREOF, the City and the Purchaser have caused this Agreement to be duly
executed by their duly authorized representatives as of the date first above written.
CITY OF KALISPELL, MONTANA
(' - 2 2-r�
By
D Ru ell, City Manager
STATE OF MONTANA )
) ss.
County of Flathead )
On this 114 -day of 0� �,) , 2022, before me, a Notary Public for the State of
Montana, personally appeared Doug Russell, proved to me to be the person whose name is
subscribed to the within instrument, and acknowledged to me that he executed the same.
IN WIT.VESS WHEREOF, I have hereunto set my hand and affixed my official seal the
day and year hereinabove first written.
NOTARY PUBLIC for the State of Montana
JUDI A. FUNK nt
A.
Fu NOTARY PUBLIC for
#Resi
State of Montana
SEAL Residing at Kalispell, Mont'
��4rFCommission Expires
OF MOMyFeb uary 25.2024
Name:
ion expires:
18
KALISPELL GARAGE APARTMENT
PARTNERS, LLC
By Montana Hotel Development Partners, LLC
Manager of Kalispell Garage Apartment Partners LLC
By: BDD, LLC
Member na Hotel Development Partners, LLC
By:
Bill d65Zberg, Mar}ager of BDD, LLC
STATE OF MONTANA )
) ss.
County of Flathead )
On this 15 day of , 2022, before me, a Notary Public for the State of
Montana, personally appeared gill Goldberg, as Member of BDD, LLC, which is a Member
of Montana Hotel Development Partners, LLC, which is the Manager of Kalispell Garage
Apart Partners, LLC, proved to me to be the person whose name is subscribed to the within
instrument, and acknowledged to me that he/she executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the
day and year hereinabove first writtei
SEAL
14AILEY BRUNCKNORST
tant,� NOTARY PUBLIC for the
State (if M601na
Relidiag 04Kaiispbil, Montana
My i;+)ItltNls"§ibH gifPlkos
9TFOFM�`-P INIaF@if 90, i�OgB
NOTARY PUBLIC for the State of Montana
Printed Name: �
Residing at: �._. k&& 9y0_
My Commission expires: 3
19
EXHIBIT A
LEGAL DESCRIPTION OF THE DEVELOPMENT PROPERTY
Real property being situated in Section 18 Township 28 North, Range 21 West,
P.M.M. Flathead County, Montana and described more particularly as Lots 17,
18,19, 20, 21, 22, 23, and 24 of Block 46 of Kalispell Original Townsite Map of
record in the Office of Clerk and Recorder for Flathead County Montana.
A-1