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HomeMy WebLinkAbout10C - 4626 Dakota ST Property DATE: AGENDA#: PREPARED BY: CITY COUNCIL AGENDA REPORT 16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 AGENDA ITEM: DISCUSSION: ISSUES: May 16, 2005 10C Kelly Meyer, Assistant to the City Manager CONSIDER APPROVAL OF A RESOLUTION AUTHORIZING THE MAYOR AND CITY MANAGER TO ENTER INTO A MODIFIED VERSION OF THE CITY'S STANDARDIZED PURCHASE AGREEMENT FOR THE PROPERTY LOCATED AT 4626 DAKOTA STREET S.E. IN CONNECTION WITH THE POLICE STATION I CITY HALL CONSTRUCTION PROJECT. History: In November 2004, the City Council established a schedule and process for selecting the Police Station / City Hall site. At its January 18, 2005 regular meeting, the City Council chose the existing City Hall site, together with a site north of the existing City Hall across Dakota Street that would be a combination of three properties, as the location for the new public facilities. The Council further authorized staff to enter into negotiations with the property owners to acquire the necessary property. Current Circumstances: One of subject properties is located at 4626 Dakota Street SE. This property was formerly owned by Harvey Klingberg, and is now held by his estate after Harvey's passing earlier this year. Kenny Klingberg, Harvey's son, has been appointed as the Personal Representative of the estate and has the requisite authority to enter into a purchase agreement for the sale of the property. Staff has been working closely with Kenny Klingberg, his family and the attomey for the estate to negotiate the terms of the attached Purchase Agreement. The terms of the agreement are as follows: 1. The purchase pdce for the property is $260,000.00. 2. The City will be responsible for the closing costs for both the City and the estate. 3. The costs that may be required to provide clear title to the property are the responsibility of the Seller in an amount not to exceed $1000. In the event the costs to cure any title defects do exceed $1000, the City will have the option to (1) accept title without requiring further cure of the title issue, (2) pay the costs to cure the title issue, or (3) to rescind the agreement. 4. Seller will pay the 1st half real estate taxes for 2005. The City will be responsible for the 2.d half real estate taxes, as well as payment of a deferred special assessment balance in the amount of $2886.00. 5. The Seller has disclosed vadous instances that have the potential to necessitate environmental clean-up on the site. After the City completes its due diligence, should the City determine that the costs of clean-up of the site are too substantial, the City can elect to rescind the agreement. Staff will work closely with the Title Company and the Seller to facilitate a smooth transaction. Should the City Council approve the terms and conditions of the purchase, we would hope to close by June 3rd provided that the environmental testing has been completed so that the City is able to identify its total exposure. First, as the Council is aware, the property has environmental concems. The estate has disclosed, and our initial soil borings have verified, that there are two petroleum tanks buded near the existing garage that were at one time used for pumping fuel. In addition, it also appears that for a number of years a portion of the property may have been used by the general public as an unofficial dump www.cityofpriorlake.com I:\PROJECTS\CITY HALL PD CONSTRUCTION R JECT~P.E ,TIO 626 T. T KLINGBERG ACQUISITION.DOC FINANCIAL IMPACT: site. At this time, the Engineering firm completing the Phase I environmental assessment has determined that there was some petroleum found in one of the borings by the existing garage, but the extent of the contamination has not been fully identified. Further borings will be taken in the vicinity to attempt to determine the extent of any soil correction that will be required. The engineers did not identify at this time a need for a Phase II environmental study, indicating that their preliminary inspection concludes that the remainder of the contamination observed on the site was surface garbage and easily removable. Under typical circumstances, if the estate were to sell the property as a residential site, it would likely be obligated to mitigate the contamination in some fashion, or risk payment of future damages. Under the terms of the proposed Purchase Agreement, the City will complete its full evaluation of the environmental issues on the site before proceeding to close the transaction, or, if the transaction was closed, the City would assume all risk of potential required clean-up on the site. In addition, as the Council is aware, even though our environmental analysis may identify most of the contamination, there is always the potential that more contamination will be found once grading work begins. The City would dsk some exposure for additional costs to mitigate that contamination as well. However, there is an opportunity to look at this acquisition as a "win-win" for the public. The acquisition of the property (and its probable clean up) is not only an opportunity to meet the site requirements for the new City Hall facility, but also an opportunity to address environmental contamination and clean-up on a site where it needs to take place in any case. Even though the City's exposure is greater, a public service is provided in mitigating future impacts the contamination may have on adjacent natural areas and ponds. Secondly, in negotiating the terms of the Purchase Agreement, the Seller expressed concem on several occasions that the estate be able to limit its exposure for incurring additional costs for environmental clean-up, correction of title, or specific performance of the contract. In a nutshell, they would like the City to take the property "AS IS". The Purchase Agreement does attempt to address the concerns of the estate and proposes that the City acquire the property in an "AS IS" condition, if or when we proceed to closing. However, the agreement also provides the City an opportunity to fully evaluate the potential exposure prior to closing, as well as provide the recourse of being able to rescind the agreement in the event that the costs to cure appear too substantial. This is not to say that the City's risk is not somewhat greater than what our standardized contract provides. For the City, this means that with respect to title issues, if an issue is identified after the closing, or the cost to cure a title defect exceeds $1000 and the Seller will not undertake to cure, the City will assume the costs to cure and will not be able to seek damages from the estate, or require the estate to undertake to cure the title defects. Likewise, the City will not be able to seek damages or additional costs to participate in clean-up of environmental issues. At this time, the title work has not revealed any particular title issues. As previously indicated with respect to environmental issues, our review is not yet complete. During consideration of this item, the City Council should be aware of the potential risks and potential advantages that go with the purchase of this particular site. The City Attorney has reviewed the Agreement and believes the language is appropriate as long as the City Council fully understands the additional exposure it may incur. The City Council should consider if it wishes to acquire the property based upon the identified risks and the terms and conditions of the attached Purchase Agreement as outlined herein. The attached resolution authorizes the expenditure of $260,000 for the purchase price plus an amount not to exceed $10,000 for closing costs. Staff does not anticipate that costs for closing will I:\PROJECTS\CITY HALL - PD CONSTRUCTION PROJEC~PROPERTY ACQUISITIONS\4626 DAKOTA\CC REPORT - KLINGBERG ACQUISITION.DOC reach $10,000, but because we cannot identify at this point all of the potential costs, authorizing an amount not to exceed will permit the staff to close the transaction without coming back to the City Council to authorize additional funding pdor to closing. If the final costs exceeded $10,000, the staff would bring the item back to the Council. The funding for this purchase would be allocated from the Building Fund, and is within the budget identified for property acquisition for the project. However, as the Council is aware, as the project proceeds the City will also incur some additional costs for the removal of any remaining personal property from the site, as well as demolition of the structures. Those costs are also programmed in the project budget. ALTERNATIVES: RECOMMENDED MOTION: REVIEWED BY: (1) Adopt the attached resolution authorizing the Mayor and City Manager to enter into a modified version of the City's Standardized Purchase Agreement for the property located at 4626 Dakota Street SE, Prior Lake, based upon the terms and conditions set forth herein in an amount not to exceed $270,000. (2) Take no action and direct the staff accordingly. Frank Boy~ h\PROJECTS\CITY HALL - PD CONSTRUCTION PROJECT,PROPERTY ACQUISITIONS\4626 DAKOTA\CC REPORT - KLINGBERG ACQUISITION.DOC 16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 RESOLUTION 05-XX A RESOLUTION AUTHORIZING THE MAYOR AND CITY MANAGER TO ENTER INTO A MODIFIED VERSION OF THE CITY'S STANDARD PURCHASE AGREEMENT FOR THE PROPERTY LOCATED AT 4626 DAKOTA STREET SE IN CONNECTION WITH THE POLICE STATION / CITY HALL PROJECT. Motion By: Second By: WHEREAS, the 2020 Vision and Strategic Plan and 2005 Capital Improvement Program call for the construction of a new Police Station / City Hall facility; and WHEREAS, the City Council, at its January 18, 2005 regular meeting, selected a site for these public facilities that included the existing City Hall site, together with a site combining three properties directly north of the existing City Hall site along Dakota Street; and WHEREAS, the City Council further directed staff to pursue the negotiated purchase of the three properties needed for the City Hall site; and WHEREAS, the City staff has negotiated in good faith the terms and conditions for the purchase of property located at 4626 Dakota Street SE; and WHEREAS, the property owner has indicated his acceptance of the terms of the purchase by executing a modified version of the City's standard purchase agreement; and WHEREAS, the Council believes the terms and conditions are appropriate. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA that: 1. The recitals set forth above are incorporated herein. 2. The Mayor and City Manager are hereby authorized to enter into a modified version of the City's Standard Purchase Agreement for the purchase of the property at 4626 Dakota Street SE, Prior Lake, MN, in accordance with the terms and conditions outlined in Staff Report 10C, dated May 16, 2005. 3. The funding for this transaction shall be made from the Building Fund in an amount not to exceed $270,000. (purchase price of $260,000 plus closing costs). PASSED AND ADOPTED THIS 16TM DAY OF MAY, 2005. YES NO Hau~len Hau~len Flemin9 Flemin~ LeMair LeMair Petersen Petersen Zieska Zieska City Manager, City of Prior Lake R:\RESOLUTI~005 Drafts\Klingberg purchase. DOC www. cityofpriorlake, com Phone 952.447.4230 / Fax 952.447.4245 PURCHASE AGREEMENT THIS PURCHASE AGREEMENT is made as of between the CITY OF PRIOR LAKE, a Minnesota municipal corporation, with offices at 16200 Eagle Creek Avenue SE, Prior Lake, Minnesota ("Buyer"), and KENNY KLINGBERG AS PERSONAL REPRESENTATIVE OF THE ESTATE OF HARVEY O. KLINGBERG ("Seller"). IN CONSIDERATION of the promises and covenants contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Seller and Buyer agree as follows: 1. Sale of Property. Seller agrees to sell to Buyer, and Buyer agrees to buy from Seller the real property located in Prior Lake, Minnesota, and legally described as together with all improvements, easements and rights benefiting or appurtenant thereto (collectively referred to as the "Property"). The above legal description is subject to modification by agreement of the parties based upon the Title Commitment to be issued pursuant to Section 7a hereof. 2. Purchase Price and Manner of Payment. The total purchase price (the "Purchase Price") to be paid by Buyer to Seller for the Property shall be Two Hundred Sixty Thousand and 00/100 Dollars ($260,000.00), payable in the following manner: a. $5,000.00 as earnest money (the "Earnest Money") which shall be deposited with such title insurance company as may be designated by Buyer (the "Title Company"). b, The balance in cash or by wire transfer on the Date of Closing (as defined in Paragraph 4 of this Agreement). 3. Acceptance Deadline. The offer to purchase contained in this Agreement (the "Offer") shall be revoked and shall be null and void on May 13, 2005 at 11:59 p.m. (the "Acceptance Deadline"), unless the Buyer and Seller has accepted the Offer by the Acceptance Deadline. In order to constitute acceptance of the Offer, Seller and Buyer must execute this Agreement and provide a copy of the fully executed Agreement to Buyer in the manner provided for giving notices specified in Paragraph 17 of this Agreement. 4. Closin.q and Possession,. The closing of the purchase and sale contemplated by this Agreement (the "Closing") shall be on or before June 1, 2005, or such other date as may be mutually agreed to by the parties (the "Date of Closing" or "Closing Date"). The Closing shall take place at the offices of a title company selected by Buyer (the "Title Company") or at such other place as may be agreed to by the parties. The parties shall deliver the following documents at Closing: a, Seller's Closinq Documents. On the Closing Date, Seller shall execute and deliver to Buyer the following (collectively, "Seller's Closing Documents"): Page -1- b. Personal Representative's Deed. A Personal Representative's Deed conveying title to the Property to Buyer free and clear of all encumbrances, liens, covenants, conditions, easements, restrictions, reservations, and assessments, except as shown in the attached Exhibit A (the "Permitted Encumbrances"). Seller must comply with all necessary requirements in order to perfect the conveyance of the property. Seller's Affidavit. An Affidavit of Title by Seller indicating that on the Closing Date there are no outstanding, unsatisfied judgments, tax liens or bankruptcies against or involving Seller or the Property; that there has been no skill, labor or material furnished to the Property by or at the request of Seller for which payment has not been made or for which mechanic's liens could be filed; and that there are no other unrecorded interests in the Property. ... III. FIRPTA Affidavit. A non-foreign affidavit, properly executed and in recordable form, containing such information as is required by IRC Section 1445(b) (2) and its regulations. iv. Abstract of Title. Buyer acknowledges receipt of separate abstracts for Lots 1 and 2, Block 8, Prior Lake, and for the East 50 feet of Lots 7 - 12, Block 8, Prior Lake, Scott County, Minnesota, in order for the Title Company to prepare its Title Insurance Commitment. Any update of the Abstract of Title as a result of this purchase shall be purchased at the Buyer's sole cost and discretion. Vo Well Certificate. Seller represents that Seller is not aware of any wells on the Property. vi. Right of Entry / Waiver of Trespass.. Buyer has entered upon the Property and retains the right to do so prior to closing pursuant to a Right of Entry/Waiver of Trespass agreement which allows the City to enter upon the Property for the purpose of conducting its inspections, including but not limited to soil borings and any other environmental evaluation deemed appropriate by the Buyer. vii. Power of Attorney. For the purposes of this transaction, if Seller is to act on behalf of the fee owner under the authority of a Power of Attorney, an originally executed, recordable Power of Attorney document must be submitted with the Abstract of Title to the Title Company. .,. VIII. Title Documents. Seller will provide all other documents necessary as determined by the Title Company in order to provide clear and marketable title to Buyer, including but not limited to a Personal Representative's Deed to Buyer from Seller, or such other person or entity that holds the fee title to the Property, free and clear of all encumbrances, liens, covenants, conditions, easements, restrictions, reservations and assessments, except the Permitted Encumbrances. Costs for providing said documents will be borne by the Seller. Recording fees and State Deed Tax will be paid by Buyer. Buyer's Closing Documents. On the Closing Date, Buyer will execute and deliver to Seller the following (collectively, "Buyer's Closing Documents"): Purchase Price. The sum of Two Hundred Sixty Thousand and 00/100 Dollars ($260,000.00). Page -2- ii. Title Documents. Such Affidavits of Purchaser, Certificates of Value or other documents as may be reasonably required in order to record the Seller's Closing Documents. 5. Possession of Property. Seller shall vacate the Property as of the Closing Date. Seller shall remove from the property prior to the Closing Date any personal property or fixtures desired, including but not limited to appliances and keepsakes. . Agreement. a. bo c. d. Prorations. Seller and Buyer agree to the following allocations of costs regarding this Seller's Closing Costs. Seller shall pay (i) the cost of obtaining any documents necessary to make title to the Property marketable as provided in this Agreement; and (ii) any other cost or expenses allocated to Seller under this Agreement. Buyer's Closing Costs. Buyer shall pay (i) the cost of preparing the Buyer's Closing Documents, (ii) the total closing fee charged by the Title Company, (iii) the cost of the title insurance commitment as provided in this Agreement, (iv) the premium for any title insurance policy purchased by Buyer, and (iv) any other cost or expense allocated to Buyer under this Agreement. Real Estate Taxes and Special Assessments. General real estate taxes payable in 2004 and all prior years shall be paid by Seller. Real estate taxes payable for the first half of 2005 (due May 15th) shall be paid by Seller. Real estate taxes due and payable for the second half of 2005 (due October 15th) and subsequent years shall be paid by Buyer. .., III. Seller shall pay any special assessments (including interest) payable with general real estate taxes in 2005. The Buyer shall pay the balance of any levied, pending, or deferred special assessments. In the event that the amount of the Special Assessments is unknown as of the Date of Closing, Buyer shall escrow with the Title Company on the Date of Closing one and one-half (1.5) times the estimated amount of the Special Assessments. Upon receipt of notification of the actual amount of the Special Assessments, the Title Company shall pay such amount from the escrowed funds. Any escrowed funds remaining after payment of the actual amount of the Special Assessments shall be disbursed to Buyer. In the event that the escrowed funds are not sufficient to pay the actual amount of the Special Assessments, Buyer shall deposit with the Title Company such additional amounts as may be necessary to fully pay the actual amount of the Special Assessments. Buyer shall pay such additional amount to the Title Company within fourteen (14) days of the date of notice that the escrowed funds are not sufficient to pay the actual amount of the Special Assessments Miscellaneous. i. In addition to those costs and expenses allocated to and/or to be paid or assumed by Seller pursuant to this Agreement, Seller agrees to pay any other closing costs and expenses customarily paid by sellers and Buyer agrees to pay any other closing costs and expenses customarily paid by buyers. Page -3- ii. Seller hereby indemnifies Buyer for any claim, cost, or damage related to any brokerage fee due because of this Agreement. 7. Title Evidence,. Buyer shall obtain, at Buyer's expense, the following (collectively, the "Title Evidence"): a, Within thirty (30) days of the date of this Agreement, a commitment by the Title Company to issue an ALTA Form B 1990 Owner's Policy of Title Insurance, in an amount equal to the Purchase Price, to insure Buyer's title to the Property (the "Title Commitment"), including copies of documents referenced in Schedule B thereof. The Title Commitment shall have an effective date of no earlier than the date of this Agreement. The Title Commitment shall include affirmative coverages for appurtenant easements, if any. The Title Commitment shall obligate the Title Company to delete standard exceptions from the Title Commitment and the policy upon the Title Company's receipt of a satisfactory survey of the Property, a seller's affidavit in the form described in Paragraph 4a(iii) and a buyer's affidavit in the form described in Paragraph 4b(ii). The costs for the Title Commitment shall be borne by the Buyer. b. Seller is not aware of and does not have any survey of the Property in Seller's Possession. Buyer may, at Buyer's sole cost and expense, have a current survey of the Property prepared by a surveyor registered under the laws of State of Minnesota. Such survey shall be certified to Buyer and the Title Company, and the certification language shall be reasonably acceptable to Buyer (the "Survey"). The Survey shall meet the 1999 Minimum Standard Detail Requirements for ALTA/ACSM Title Surveys. 8. Title Examination~ Title Corrections and Remedies. Within ten (10) business days of Buyer's receipt of the last item of Title Evidence and within ten (10) business days of Buyer's discovery of a defect in the marketability of Seller's title to the Property which defect was not reasonably ascertainable from the Title Evidence, Buyer shall deliver written objections thereto to Seller (the "Objections"). Seller shall have sixty (60) days from receipt of the Objections to make title marketable. Upon receipt of the Objections, Seller shall, within ten (10) business days, notify Buyer of Seller's intention to make title marketable within the 60-day period. Seller is obligated to cure Objections where the costs to cure is less than $1000. In the event the costs to cure the Objections exceeds $1000, the Seller shall notify Buyer whether Seller intends to make title marketable. If Seller does not intend to make title marketable, Buyer may proceed with any of its remedies identified herein, at its sole discretion. Liens or encumbrances for liquidated amounts that can be released by payment or escrow from proceeds of closing shall not delay the closing. Cure of the defects by Seller shall be diligent and prompt. Pending correction of title, the payments required hereunder shall be postponed, but upon correction of title, and within ten (10) days after written notice to the Buyer, the parties shall perform this Agreement according to its terms. ao If notice is given and Seller makes title marketable, then upon presentation to Buyer of documentation establishing that title has been made marketable, and if not objected to in the same time and manner as the original title objections, the Closing shall take place within ten (10) business days or on the scheduled Closing Date, whichever is later. b. If notice is given and Seller attempts in good faith to make title marketable but the 60- day period expires without title being made marketable, Buyer may declare this Agreement null and void by notice to Seller, and neither party shall be liable for damages hereunder to the other. Page -4- C. d. e. If Seller does not give notice of intention to make title marketable, or if notice is given but the 60-day period expires without title being made marketable, or if notice is given that Seller does not intend to make title marketable because the costs to cure will exceed $1000, Buyer may, as permitted by law, pursue any one or more of the following: Proceed to closing without waiver or merger in the deed of the Objections and without waiver of any remedies, and may undertake proceedings to correct the objections to title, at its sole cost and discretion; ii. Rescind this Purchase Agreement by notice as provided herein, in which case the Purchase Agreement shall be null and void; ,., III. Waive the Objection, at Buyer's sole discretion, and accept title subject to the Objections and proceed to Closing in which event all uncured Objections shall be considered Permitted Encumbrances; If title is marketable, or is made marketable as provided herein, and Buyer defaults in any of the agreements herein, Seller may cancel this Agreement as provided by statute and retain all payments made hereunder as liquidated damages. If title is marketable, or is made marketable as provided herein, and Seller defaults in any of the agreements herein, Buyer may, as permitted by law, Terminate this Agreement in which case Seller must relinquish all Earnest Money paid herein, and the Purchase Agreement shall become null and void; or Seek specific performance within six (6) months after such right of action arises. 9. Inspections. Buyer may perform such inspections of the Property as Buyer, in Buyer's sole discretion, deems appropriate (the "Inspections"). The Inspections shall be done at Buyer's sole cost and expense. Buyer and Buyer's agents shall have the right, upon reasonable advance notice to Seller, to go upon the Property to perform the Inspections. 10. Representations and Warranties by Seller. Seller makes the following representations to Buyer as of the date of this Agreement and as of the Date of Closing: a. Authority. Seller represents and warrants to Buyer that as of May 2, 2005, Seller has the requisite power and authority to enter into this Agreement and the Seller's Closing Documents to be signed by Seller; that the execution, delivery and performance by Seller of such documents do not conflict with or result in violation of any judgment, order, or decree of any court or arbiter to which Seller is a party; and such documents are valid and binding obligations of Seller, and are enforceable in accordance with their terms. b. Title to Property. Seller owns or will own on the Closing Date, the Property free and clear of all encumbrances, liens, covenants, conditions, easements, restrictions, reservations, and assessments, except the Permitted Encumbrances. Page -5- C, do e. g, h, Assessments. Seller has received no notice of threatened special assessments or reassessments of the Property. Deferred assessments with the approximate balance of $2886.00 exist on the Property and will be paid at Closing by Buyer. Environmental Laws. To the best of Seller's knowledge, no toxic or hazardous substances or wastes, pollutants or contaminants (including, without limitation, asbestos, urea formaldehyde, the group of organic compounds known as polychlorinated biphenyls, petroleum products including gasoline, fuel oil, crude oil and various constituents of such products, and any hazardous substance as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980 CCERCLA", 42 U.S.C. §9601-9657, as amended) have been generated, treated, stored, released or disposed of, or otherwise placed, deposited in or located on the Property, nor has any activity been undertaken on the Property that would cause or contribute to (i) the Property becoming a treatment, storage or disposal facility within the meaning of, or otherwise bring the Property within the ambit of, the Resource Conservation and Recovery Act of 1976 CRCRA"), 42 U.S.C. §6901 et. seq., or any similar state law or local ordinance, (ii) a release or threatened release of toxic or hazardous wastes or substances, pollutants or contaminants, from the Property within the meaning of, or otherwise bring the Property within the ambit of, CERCLA, or any similar state law or local ordinance, or (iii) the discharge or pollutants or effluents into any water source or system, the dredging or filling of any waters or the discharge into the air of any emissions, that would require a permit under the Federal Water Pollution Control Act, 33 U.S.C. §1251 et. seq., or the Clean Air Act, 42 U.S.C. §7401 et. seq., or any similar state law or local ordinance. To the best of Seller's knowledge, there are no substances or conditions in or on the Property that may support a claim or cause of action under RCRA, CERCLA or any other federal, state or local environmental statutes, regulations, ordinances or other environmental regulatory requirements, including without limitation, the Minnesota Environmental Response and Liability Act, Minn. Stat. §115B CMERLA") and the Minnesota Petroleum Tank Release Cleanup Act, Minn. Stat. §115C, except that Seller is aware that one or more underground petroleum storage tanks existed in front of the garage on the Property, and that during the deceased's ownership of the Property, a portion of the Property may have been used by the general public as an unofficial disposal site. Rights of Others to Purchase Property. There are no unrecorded mortgages, contracts, purchase agreements, options, rights of first refusal, leases, easements or other agreements or interests relating to the Property and there are no persons in possession of any portion of the Property, except as may be disclosed by the Title Evidence; Seller's Defaults. Seller is not in default in the performance of any of Seller's obligations or liabilities under any easement agreement, covenant, condition, restriction or other instrument relating to the Property. FIRPTA. Seller is not a "foreign person," "foreign partnership," "foreign trust," or "foreign estate" as those terms are defined in Section 1445 of the Internal Revenue Code. Proceedings. There is no action, litigation, investigation, condemnation or proceeding of any kind pending or, to the best knowledge of Seller, threatened against Seller or the Property. Page -6- Wells,.. Seller certifies that Seller does not know of any "Wells" on the described Property within the meaning of Minn. Stat. §1031. This representation is intended to satisfy the requirements of that statute. Private Sewer Systems. Seller certifies that Seller does not know of any private sewer system on or serving the Property, nor have any been installed or removed during Seller's ownership of the Property. k. Compliance. To the best of Seller's knowledge, the Property fully conforms with all applicable statutes, laws, codes, ordinances and restrictions including all zoning, platting, subdivision and use laws and all building, energy and environmental codes and regulations. To the best of Seller's knowledge, all improvements are located entirely within the boundary lines of the Property and do not encroach upon any adjacent property and no improvements on any adjacent property encroach upon the Property. Access. To the best of Seller's knowledge, the Property abuts on and has direct vehicular access to a public road or has driveway access to public roads by permanent, irrevocable easements which will be conveyed to Buyer on the date of closing, and Seller has no knowledge of any fact or condition which would result in the termination of such access. Seller will indemnify Buyer, and Buyer's successors and assigns, against, and will hold Buyer, and Buyer's successors and assigns, harmless from, any expenses or damages, including reasonable attorney's fees, that Buyer incurs because of the breach of any of the above representations and warranties, whether such breach is discovered before or after Closing. Consummation of this Agreement by Buyer with knowledge of any such breach by Seller will not constitute a waiver or release by Buyer of any claims due to such breach. Each of the representations and warranties set forth above shall survive the Closing. Buyer agrees to accept the Property in "as is" condition, except as may be provided elsewhere in this Agreement. 11. Representations and Warranties of Buyer. Buyer represents and warrants to Seller that Buyer is a duly organized municipal corporation under the laws of the State of Minnesota; that Buyer is duly qualified to transact business in the State of Minnesota; that Buyer has the requisite power and authority to enter into this Agreement and the Buyer's Closing Documents to be signed by Buyer; such documents have been, or will have been by the Date of Closing, duly authorized by all necessary action on the part of Buyer and have been duly executed and delivered; that the execution, delivery and performance by Buyer of such documents do not conflict with or result in violation of Buyer's governing documents or any judgment, order, or decree of any court or arbiter to which Buyer is a party; and such documents are the valid and binding obligations of Buyer and enforceable in accordance with their terms. Notwithstanding any other provision of this Agreement, Buyer agrees that in proceeding to closing of this transaction Buyer will be representing that Buyer has investigated the Property to its satisfaction and is familiar with the physical and environmental condition and uses thereof and public health and safety matter relating thereto; that Buyer has inspected, examined and investigated to its satisfaction all laws, ordinances, and governmental rules and regulations, including environmental and public health related laws, ordinances, rules and regulations, and policies relating thereto, and is purchasing the Property subject to any violations thereof; and that policies relating thereto, and is purchasing the Property subject to any violations thereof, and that Buyer is purchasing the Property "AS IS" and at its own risk including with respect to any environmental condition which may exist. Page -7- Buyer will indemnify Seller, and Seller's successors and assigns, against, and will hold Seller, and Seller's successors and assigns, harmless from, any expenses or damages, including reasonable attorney's fees, that Seller incurs because of the breach of any of the above representations and warranties, whether such breach is discovered before or after Closing. Consummation of this Agreement by Seller with knowledge of any such breach by Buyer will not constitute a waiver or release by Seller of any claims due to such breach. Each of the representations and warranties set forth above shall survive the Closing. 12. Buyer's Continqencies. The obligations of Buyer under this Agreement are contingent upon each of the following: a, Representations and Warranties. The representations and warranties of Seller contained in this Agreement shall be true at the time this Agreement is executed and on the Closing Date as if made on the Closing Date. bo Title. Title shall have been found acceptable, or been made acceptable, in accordance with the requirements and terms of this Agreement. C, Performance of Seller's Obliqations. Seller shall have performed all of the obligations required to be performed by Seller under this Agreement, as and when required by this Agreement. do Survey.. Buyer shall be satisfied, in Buyer's sole discretion, with any survey obtained at Buyer's cost. e. Inspections. The results of any Inspections shall be satisfactory to Buyer, in Buyer's sole discretion, including but not limited to a Phase I Environmental Study, Environmental Assessment Worksheet, or such other environmental analysis necessary to evaluate the need to address or otherwise clean up hazardous materials on the site, if any, which clean up may be required in order to use the property for the construction of a City Hall facility. Unless each of the above contingencies is satisfied, removed, or specifically waived by Buyer one day before the Date of Closing, Buyer shall have the right to cancel this Purchase Agreement by giving Seller written notification of Buyer's election to so cancel. Upon delivery of such written notification, this Purchase Agreement shall be null and void, and Seller and Buyer agree to execute a cancellation of this Purchase Agreement. 13. Operation Prior to Closinq. During the time period between the date of this Agreement and the Closing Date (the "Executory Period"), Seller shall operate and maintain the Property in the ordinary course of business in accordance with prudent and reasonable business standards. Seller shall execute no contracts, leases, or other agreements regarding the Property during the Executory Period which extend beyond the Closing Date without the prior written consent of Buyer, which consent may be withheld by Buyer, in Buyer's sole discretion. 14. Brokers. The Buyer is not represented by any broker. The Seller is not represented by any broker. Page -8- 15. Survival. All of the terms, conditions, representations, warranties, and indemnifications contained in this Agreement shall survive and be enforceable after the Closing. 16. Notices.. Any notice required or permitted to be given by either party upon the other is given in accordance with this Agreement if notice is directed to Seller by delivering notice personally to any one of the undersigned of sellers; or if notice is directed to Buyer, by delivering notice personally to any one of the undersigned buyers; or if mailed in a sealed wrapper, properly addressed, by United States registered or certified mail, return receipt requested, postage prepaid; or if transmitted by facsimile, copy followed by mailed notice as above required; or if deposited cost paid with a nationally recognized, reputable overnight courier, properly addressed as follows: If to Seller: Estate of Harvey O. Klingberg Kenny L. Klingberg, Personal Representative 17815 Panama Avenue Prior Lake, MN 55372 with a copy to: James D. Bates, Esq. HUEMOELLER, BATES & GONTAREK PLC 16670 Franklin Trail SE Prior Lake, MN 55372 If to Buyer: City of Prior Lake 16200 Eagle Creek Avenue SE Prior Lake, MN 55372 Attn: Frank Boyles, City Manager with a copy to: Suesan L. Pace, Esq., City Attorney for City of Prior Lake HALLELAND, LEWIS, NILAN SIPKINS & JOHNSON Pillsbury Center South 220 South Sixth Street, Suite 600 Minneapolis, MN 55402-4501 Notices shall be deemed effective on the earlier of the date of receipt or the date of deposit as aforesaid; provided, however, that if notice is given by deposit, that the time for response to any notice by the other party shall commence to run one (1) business day after any such deposit. Any party may change its address for the service of notice by giving written notice of such change to the other party, in any manner above specified, ten (10) days prior to the effective date of such change. 17. Miscellaneous Governin.q Provisions. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legatees, representatives, successors, and assigns. This Agreement shall be construed and interpreted in accordance with the laws of the State of Minnesota. No failure on the part of a party to this Agreement to exercise, and no delay in exercising, any rights contained in the Agreement shall operate as a waiver of such rights, nor shall any single or partial exercise of any rights hereunder preclude any other or further exercise of such rights or the exercise of any other right. The remedies provided in this Agreement are cumulative and not exclusive of any other remedy provided by law or equity. ,All terms and words used in this Agreement shall be construed to include any other number and any other gender as the context or sense of this Agreement or of any paragraph of this Agreement may require as if such terms or words had been fully and properly written in the appropriate number and gender. Any exhibits to this Agreement are a part of this Agreement. Captions are provided for convenience and ease of reference only and do not affect or modify the terms of any of the provisions of this Page -9- Agreement. All of the provisions of this Agreement are separable, so if any provision of this Agreement is held to be ineffective by a court of competent jurisdiction, the remaining provisions of this Agreement shall remain in full force and effect unless the invalidated provision is so fundamental to this Agreement that the remaining provisions do not reflect the parties' intent. This Agreement contains the entire agreement of the parties with respect to the subject matter of this Agreement and supersedes any and all prior Agreements and understanding between the parties with respect to the same. The terms of this Agreement have been cooperatively negotiated by and among the parties hereto, and this Agreement shall not be construed against any party hereto as its author. This Agreement may be modified only by a written instrument executed by both parties. There are no third party beneficiaries of this Agreement, intended or otherwise. Time is of the essence for each and every term of this Agreement. This Agreement may be executed in counterparts and, upon execution, each counterpart shall be considered an original. IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of the date first written above. SELLER: BUYER: CITY OF PRIOR LAKE Kenny L. Klingberg, as Personal Representative for the Estate of Harvey O. Klingberg By: By: Jack G. Haugen, Mayor Frank Boyles, City Manager STATE OF MINNESOTA ) )ss COUNTY OF SCOTT ) The foregoing instrument was acknowledged before me this ~ day of ,2005, by Frank Boyles, City Manager of the City of Prior Lake, Minnesota, a municipal corporation on behalf of the corporation. NOTARY PUBLIC STATE OF MINNESOTA ) )ss COUNTY OF SCOTT ) The foregoing instrument was acknowledged before me this ~ day of ,2005, by Kenny L. Klingberg, a married person, in his capacity as Personal Representative of the Estate of Harvey O. Klingberg. NOTARY PUBLIC REVIEWED AS TO FORM AND EXECUTION By: Suesan Lea Pace, City Attorney Page -10- EXHIBIT A (Permitted Encumbrances) . . Covenants, conditions, easements, restrictions, and reservations of record approved in writing by Buyer. Real estate taxes not due and payable.